If only from the data of Apple and Samsung last quarter, the sales of smartphones of the two companies seem to be good. In the first fiscal quarter of fiscal 2015 (October to December 2014), Apple announced that it sold 74.5 million iPhones, which set a new record in the company's history. Subsequently, Samsung also said in its fourth fiscal quarter of fiscal 2014 that its smartphone sales ranged from 71 million to 76 million. Due to the ambiguity of the data, this has also led many analysts to speculate on their specific sales. On the surface, what Samsung gives is good news, but it is not.
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Apple's iPhone helped the company achieve a net profit of $18 billion in the first fiscal quarter of fiscal 2015, setting a new single in the global company history. At the same time, Samsung's mobile division reported that profits fell 64% year-on-year to $1.8 billion. It is worth mentioning that Apple's above-mentioned profit is company-wide, and Samsung is only the data of the mobile sector. However, in fact, it is still the competition between the two companies' mobile phone business. It seems that this round of Samsung lost enough.
Why is Samsung and Apple selling equally on smartphones, but the difference in profits is so much? This problem is more complicated.
Obvious problem
A year ago, Samsung was celebrating its sale of 86 million smartphones in the fourth quarter of 2013. However, at this time this year, Samsung is vague about the sales of specific smartphones. The change in attitude is surprising, and the sluggish sales of smartphones may be the main reason for the company’s decline in profits.
Calculated from the worst case, even if Samsung sold 71 million smartphones in the fourth quarter of last year, it was only 4 million fewer than Apple. Although this is not the result that Samsung hopes to see, if every smartphone sold by it has a high profit margin, the number of points will not be the end of the world. However, unfortunately, the profit margin of Samsung smartphones has not been maximized.
Improve profit margin
The basic common sense in business schools is that any company that achieves sustainable development receives a higher return than the cost of producing products and services. Total revenue is the total amount earned by a company, while profit is revenue minus the company's expenses. For Apple and Samsung companies, the profit comes from the profit margin of various products. If the profit of a single iPhone is higher than that of Samsung, this will undoubtedly make Apple's overall profit higher than Samsung.
However, the unfortunate thing Samsung encountered was that it happened to be a problem of profit margin. In the field of smart phones, Apple is a well-known secret in maintaining high profits. According to estimates, although the profit margins of iPhone6 ​​and iPhone6 ​​Plus are slightly lower than their previous products, even if this is true, Apple's profit margin is still enviable.
Increasing profit margins is more difficult for Samsung. The company has too many mobile phone models, and some are targeted at products in special regions. To what extent the model is, it is estimated that only Samsung knows it. However, we can know that the profit margin of our products is declining through the sales of Samsung products. On the one hand, in order to face the increasingly fierce competition from Chinese smartphone manufacturers, Samsung is forced to lower the price on the entry-level smartphone to maintain competitiveness, which will lead to a decline in profits. For months, analysts have urged Samsung to abandon its fight in the low-end market.
On the other hand, Samsung's Galaxy S5 has been successfully blocked by Apple's iPhone6 ​​and iPhone6 ​​Plus. Lack of sales means a drop in revenue. In addition, this situation will also cause some operators to reduce the promotion of Samsung's flagship product, which in turn affects sales. All in all, Samsung is faced with two sides of the attack, and both of these opponents know how to firmly attract a specific customer base.
More than just equipment
Samsung's problem is more troublesome than we think. It is not only a problem of poor sales and cheap smartphones, but also about its software development. In terms of ecosystem revenue, Samsung can't be as successful as Apple. Through its app store App Store, Apple can get a lot of shares. In contrast, Samsung is simply pushing Google's Play Store to millions of users, with the result that Samsung has made fewer purchases.
Samsung is also trying to reverse this situation and launched its own operating system Tizen, but the software is not yet mature, and will not be able to withstand the task. Even if Samsung is making great efforts, integrating resources to use Tizen in its next-generation flagship product has limited influence. Because Samsung is not the same Samsung in the past, the days of its mobile products may be few and far between.
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