Was 2014 the beginning of the end for Samsung?

At the beginning of 2014, I predicted that Samsung’s smartphone dominance would start to ebb. It looks like I was right.

samsung galaxy nyc office logo

Predictions are a hazardous business, and I freely admit that, like other journalists and market watchers, I get them wrong all too often. So I feel totally justified in claiming success when I am able to get things right.

You hit ‘em high, I’ll hit ‘em low

Back in January 2014, I wrote a Network World post following Samsung’s Q4 earnings report asking “Have we just seen peak Samsung?” The post said Samsung’s efforts to differentiate its Android phones via proprietary software weren’t working, and that the company would consequently get hammered by both Apple on the high end and its low-cost Android competitors like Lenovo and Huawei on the low end.

While I’m jumping the gun a bit because Q4 2014 isn’t over yet, that’s pretty much exactly what’s happened this year. Apple’s iPhone 5s, 6 and 6 Plus have gobbled up high-end and phablet market share, while Chinese companies including Xiaomi (which I did not see coming) have been making global consumers wonder why they should pay a premium for Samsung devices. Samsung has now suffered four straight quarters of earnings declines, and I don’t see why that won’t continue through 2015.

On the plus side, Samsung’s Note 4 phablet has been selling well, outpacing its predecessor, the Note 3, in the U.S. and Western Europe and topping 4.5 million units within a month of its September 2014 launch. The Note 3, however, sold an estimated 5 million units in its first month. The Note Edge, with its curved screen, has also received a mostly positive reception.

The Galaxy S5 disaster

But Samsung’s flagship smartphone, the Galaxy S5, has been a disaster. The S5 sold an estimated 12 million units in its first three months, some 4 million fewer than the Galaxy S4 did in 2013. In China, Galaxy S5 sales have dropped a reported 50% compared to the S4 over six months. Sales came in so far under predictions that the Korean company was forced to dismiss several of its top mobile executives.

Samsung’s smartphone selling prices and margins continue to fall, while IDC reports the company’s smartphone market share fell all the way from 32.2% in Q3 2013 to 23.7% in Q3 2014.

"Samsung remained the clear leader in the worldwide smartphone market, but was the only company among the top five to post a negative year-over-year change," IDC said.

Could Samsung reverse its fading smartphone fortunes? Of course, but it will likely take some level of innovation far beyond the differences between the Galaxy S4 and S5. The company has hinted at significantly different new models—not just face lifts—in the pipeline. But that’s what they likely thought about the last round of products as well. It’s not always easy to tell what enhancements the mobile market will embrace and which ideas it will ignore. That’s a distinction Samsung will need to nail if it wants to regain its former mobile glory.

Join the Network World communities on Facebook and LinkedIn to comment on topics that are top of mind.
Must read: 10 new UI features coming to Windows 10