Samsung Electronics plans to cut the size of it smartphone range almost by a third in 2015 as Chinese rivals eat into its market share and profitability with cheaper devices.
The South Korean company will reduce the number of smartphone models it produces by around 25 to 30 percent, said Robert Yi, Samsung’s head of investor relations, during a company presentation in New York. A spokesman in Seoul confirmed the plan on Tuesday.
The move comes after the world’s largest smartphone maker saw its market share drop to 23.8 percent in the third quarter, from 32.5 percent a year ago, while Chinese manufacturer Xiaomi rose to third place behind second-ranked Apple, according to figures from IDC.
Market analysts say the strategy could help the company’s bottom line, at least in the short term.
“Even though smartphones’ average selling price will go down in the long term, we expect the company’s margins to improve as inventory management may get better,” said Lee Seung-woo, an analyst at IBK Securities in Seoul, via email.
Last month, analysts estimated there were about 40 million Galaxy smartphones sitting in sales channels, an indication of the growing appeal of rival, high quality Android devices on the market.
Samsung had too many “variation” models and will probably strip down the product lines to only certain types for each target price segment, Lee said. He also suggested the company may stick to the Android operating system for mobile phones instead of pursuing its own Tizen software.
Earlier this year, Samsung had to halt the release of Tizen-based phones in India and Russia as network operators elsewhere, including Japanese NTT DoCoMo and France’s Orange, backed out from the operating system’s launch plan.