The world’s largest smartphone maker continues to feel the squeeze as Apple keeps the pressure on the high end, and Chinese competitors push from the low end. The Korean giant says it expects to report operating profit of $8 billion on sales of $50 billion for the first quarter, its second straight decline in quarterly profits.
The company’s new flagship, the Galaxy S5, goes on sale in the U.S. this Friday, promising a shot in the arm for Samsung’s sales. However, the high-end Android device will face some stiff competition from the new HTC One (M8), also set to hit stores this Friday. Both new devices sport larger screens than their predecessors, with the S5 at 5.1 inches and HTC One (M8) at 5.0 inches. For reference, the iPhone 5 screen is 4 inches, but the next generation of the iPhone is expected to have a 4.7-inch screen.
At the low end of the market, Samsung faces intense competition from low-cost Chinese smartphone makers. Analysts have reported that teardowns of Chinese Android devices reveal solid engineering and reliable components at price points as low as $40 for the entire phone. Samsung should enjoy some cost savings on the supply side since it makes many of the chips for its own smartphones, but here as well it faces pressure from low-cost competitors, specifically China’s Spreadtrum and Taiwan’s MediaTek.
In what could be a negative sign for the S5, Verizon has already launched a buy-one, get one free offer. Samsung itself is also making a considerable investment to get the phone into users’ hands, offering free music and mobile commerce coupons to S5 buyers.
Despite its current slowdown, Samsung remains the undisputed powerhouse of the smartphone market. The company does not break out smartphone shipments or sales, but analysts estimate that Samsung sold 90 million smartphones during the first quarter, handily beating Apple’s record 51 million iPhone sales from Q4.
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