Samsung sales slump - S6 a curved-edged flop?

The South Korean smartphone giant is forecasting revenues down 8% and operating profit down 4% for Q1, as sales of its new curved-screen S6 Edge disappoint.

by Andrew Saunders
Last Updated: 21 Aug 2015

Samsung's latest high-end smartphone is in trouble - manufacturing problems, a lack of eager punters and too much love for arch-rival the iPhone 6 has led to gloomy profit and revenue predictions this morning.

In its new Q1 financial guidance, Samsung predicts that it will miss expectations for both - operating profit should come in at around 6.9tn won (£3.9bn) and revenues around 48tn won, down 4% and 8% respectively on Q1 2014.

The forecasts mean the seventh consecutive quarter of sliding numbers for Samsung, whose glory days when it was rivalling Apple in smartphone sales a couple of years ago must seem a long way behind it.

Now - squeezed at the top by the all-conquering iPhone 6, and at the bottom by upstart new budget players like China’s Xiaomi - it’s in danger of becoming the M&S of the smartphone world. Not quite bling enough to be premium, not quite cheap enough to be, well, cheap.

What makes these latest numbers especially significant is that they are the first to include sales of Samsung’s new top-of-the range phone the S6, and it’s curved-screen sibling the S6 Edge.

Normally the launch of a new flagship range sees a huge uptick in sales as buyers flock to be first with the latest shiny toy. So the fact that Samsung made 4.4m fewer phones in Q1 this year as last (a total of 81.1m) suggests that the S6 has failed to hit the mark pretty spectacularly.

In its defence the company points to supply problems with the S6 Edge in particular, whose unusual screen wraps around the edges of the phone itself. Tricky to manufacture in the mind-bogglingly large numbers required by today’s hungry global markets, Samsung now claims to have got the measure of the problem and expects record sales to ensue.

Maybe so, but that doesn’t alter the fact that:

a) Novelty is a perishable commodity. Samsung has already missed the biggest hump in the S6's demand curve, when the 'newness' of a device is at its peak.

b) Apple is juicier right now. Samsung's arch rival is one firm you don't see getting caught out by manufacturing and supply problems. Tim Cook’s team knew that, with product lifecycles of months not years, ensuring a bountiful supply of iPhone 6's from the moment of launch was critical.

c) What's the point of the S6 anyway? It's a highly capable smartphone, but its USP - especially the Edge’s cool-but-pointless curved screen - seems to have left buyers underwhelmed. Innovation has to deliver for the consumer - a lesson that Apple learned the hard way with the iPhone 5.

The fact that the S6 rivals the iPhone 6 in price may also have something to do with it. All of which is a shame because Samsung makes some great kit, and for Android fans (not everyone likes to be told what to do by the chino-sporting Cupertino coolsters) the prospect of a phone to beat Apple on quality feel as well as performance was a good one.

Still, this is a market where fortunes can change in the blink of an eye, so there’s every chance that the next, next big thing from Samsung could be a winner. Watch this space…

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