Korean electronics giant Samsung may face the toughest challenges in recent years in 2018
In 2018, Samsung faced a challenging year as the growth of its smartphone and semiconductor businesses slowed down. The launch of the Galaxy S9 and S9+ marked an important step for the company, but it also came with significant hurdles. In 2017, Samsung managed to thrive in a shrinking market thanks to the success of the Galaxy S8, which outperformed previous models. Additionally, the semiconductor sector was highly favorable for Samsung, driven by supply shortages and rising demand that helped the company surpass Intel as the world’s top chipmaker.
Apple's decision to use Samsung’s OLED panels for the iPhone X also boosted Samsung’s mobile division profits. As a result, Samsung’s stock price surged by over 41% in 2017. However, many of the factors that fueled this growth may not be present in 2018, leading to more cautious investor sentiment. This year, Samsung’s stock has seen minimal gains, signaling a shift in market confidence.
One major issue is the global smartphone market, which saw its first decline since 2004 in Q4 2017, with sales dropping by 5.6%. Consumers are holding onto their devices longer and are less willing to pay premium prices for new models. This trend poses a challenge for Samsung, especially as competition intensifies.
Samsung isn’t just competing with Apple anymore. Chinese brands like Huawei, OPPO, vivo, and Xiaomi are gaining ground with high-quality, more affordable smartphones. In India, a key market, Xiaomi even surpassed Samsung in the fourth quarter of 2017.
The semiconductor market, which contributed significantly to Samsung’s profits in 2017, is expected to grow at a slower pace in 2018. While the sector still reached $451 billion last year, a 7.5% increase from 2016, analysts expect a slowdown. Moreover, Apple might reduce its reliance on Samsung by sourcing displays from LG, adding another layer of uncertainty.
Despite these challenges, Samsung has introduced some innovative strategies. During the S9 launch, the company launched a trade-in program, allowing users to get up to $300 for their Galaxy S8 or iPhone X, and $200 for a Galaxy S7. This could encourage users who were delaying upgrades to purchase the latest models.
According to IHS data, the Galaxy S7 and S7 Edge remain among the most popular models, with a combined market share of 5.26%. The S6 and S5, though older, are still widely used. Although the S9 looks similar to the S8, it may not be enough to drive significant upgrades. Analysts at Counterpoint Research predict that the S9 series could sell nearly 43 million units in 2018, surpassing the S8’s 35 million units in 2017. However, if users perceive little difference between the S9 and S8, they may opt for the cheaper S8 instead, affecting Samsung’s revenue.
On the positive side, DRAM and NAND flash memory prices are rising, which should benefit Samsung in the semiconductor sector. Still, researchers note that semiconductor revenue might dip in the first quarter of 2018.
After a strong 2017, expectations for Samsung remain high. But 2018 will likely be more difficult, requiring the company to find new ways to convince consumers that the S9 offers real value. The road ahead won’t be easy, but with smart strategies and innovation, Samsung still has a chance to succeed.
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