Samsung and other handset makers say sales are up, while Apple's
revenue fell.
By Jonathan Cheng
SEOUL -- Earnings reports from the world's top smartphone makers
this week highlight how fortunes are diverging in the mobile-phone
market as competition intensifies.
For Samsung Electronics Co., the world's biggest handset maker
by shipments, smartphone sales have roared back to life after
several years of struggles, fueling a 56% jump in mobile-division
earnings and pushing profit margins back to their highest levels
since 2013.
The South Korean technology giant's earnings report on Thursday
added more evidence of the tough competition that Apple Inc. faces
as it prepares to introduce the latest refresh of its iPhone later
this year.
Earlier this week, China's Huawei Technologies Co., which ranks
just behind Apple as the world's No. 3 smartphone maker by volume,
said that it was on pace to sell 140 million smartphones this year,
a target that is 30% higher than a year earlier.
And in China, fast-rising domestic handset makers Oppo
Electronics Corp. and Vivo Communication Technology Co., virtually
unknown outside the country, have quickly, and quietly, surged to
become the world's No. 4 and 5 smartphone makers by shipment
volumes, data from research firm Counterpoint Technology Market
Research showed.
Taken together, these advances by makers of smartphones powered
by Android, a unit of Alphabet Inc.'s Google, pose a formidable
challenge to Apple, which has suffered two consecutive quarters of
falling revenue and market-share decline as demand for its iPhones
slows, especially in China.
On Tuesday, Apple reported a 27% drop in quarterly net profit,
its second consecutive quarter of falling revenues, as the average
selling price of its devices fell below $600.
To be sure, companies like Samsung and Huawei aren't as
profitable as Apple. The Cupertino, Calif., company reported a
gross margin of 38%, lower than in recent quarters but still more
than twice that of Samsung, which boasts the highest profit margin
of any Android handset maker at 16.3%.
But with growth in the global smartphone market virtually slowed
to zero, any gains made by Samsung, Huawei and a host of other
Chinese handset makers will likely come at Apple's expense.
In the second quarter of the year, Apple's share of the global
smartphone market fell to 11.9%, its smallest share since before
2009, according to data from market-research firm Strategy
Analytics.
Counterpoint found that Chinese midtier brands Oppo and Vivo
were the only two that had significantly raised their smartphone
shipments in the second quarter, rising 135% and 62% respectively
from the year before.
The two brands shipped a combined 39 million units in the second
quarter, roughly as many as Apple, whose shipments shrank by 15%
over that stretch.
For Samsung, the strong numbers are further vindication for a
smartphone giant that was spinning its wheels just a year ago as
Apple's hot-selling iPhone 6 and iPhone 6 Plus dominated the
premium segment of the smartphone market and Samsung's Galaxy S5
and S6 floundered.
But the iPhone's momentum faded coming into 2016, and few major
changes are likely when Apple is expected to introduce the iPhone
6's successor in the fall.
Samsung's Galaxy S7, meanwhile, broke through by resolving
supply-chain issues that had bedeviled last year's flagship phone
and by offering many of the features that smartphone users say they
want, such as water resistance and a slick-looking metal-framed
design.
For the April-to-June quarter, Samsung said that it earned about
5.85 trillion Korean won ($5.2 billion), its most profitable
quarter in two years, thanks in large part to robust sales of its
Galaxy S7 smartphone.
Samsung's mobile division earned 4.32 trillion won in operating
profit, a 57% jump from a year earlier.
The smartphone strength came just in time for Samsung, whose
success relies on roughly equal parts selling smartphones to
consumers and selling components such as semiconductors and display
panels to other device makers.
In recent quarters, the components side of the business has
struggled as a glut of supply for memory chips pushed down selling
prices. In the second quarter of the year, operating profits at the
company's components business fell 28% from a year earlier.
The coming quarters could see a reversal of that trend, with
executives predicting a pickup in component sales as the smartphone
business faces more headwinds from intensified competition and
higher marketing spending.
Meanwhile, Samsung is hoping that the Tuesday launch of the
latest version of its larger-size smartphone, called the Galaxy
Note, which is a month earlier than its customary launch time in
early September, can give it a bigger jump on Apple's expected
iPhone announcement.
As Samsung has showed signs of stability in its core smartphone
business, investors have rewarded the company by pushing its stock
up to its highest levels in more than three years, though shares
slipped 1.3% on Thursday amid the company's cautious guidance on
the coming quarter.
By contrast, Apple's stock had tumbled 22% in the past year
before a rebound Wednesday and is a 30% rally away from the
all-time closing high that it hit last year, even after Wednesday's
stock jump.
Write to Jonathan Cheng at jonathan.cheng@wsj.com
(END) Dow Jones Newswires
July 29, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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