New York Times: Chinese manufacturers erode samsung profits

New York Times: Chinese manufacturers eat into Samsung's profits lead: Samsung's profits began to shrink in the face of price pressures from manufacturers such as China's millet and Huawei, according to a commentary published July 14 in the New York Times print edition. And to really deal with this challenge, not just hardware, but also efforts to develop software and services, but this is precisely the Achilles heel of Samsung. The following is the full text of the article: Price competition Sheng extremely and decline, extremes meet. I'm afraid it would be more appropriate for Samsung. The world's biggest handset maker has recently seen a decline in profits, partly due to price pressures from Chinese companies. Samsung said last week that its latest quarterly profit could shrink 25% per cent year-on-year. Samsung cites a number of factors, one of which is fierce competition from Chinese manufacturers. In the past year, companies such as Millet and Huawei have dramatically increased China's market share, with virtually no profit-making equipment. Chinese companies have succeeded in seizing many areas, including PCs and solar power, with this low-cost model. This strategy is usually adopted after the market matures, by which time Chinese companies will be able to produce and sell their products at close cost, increasing market share, and thus erode the profits of established companies. Investors and analysts are now curious whether Samsung will choose to cut prices or respond to rivals ' challenges with more innovation. How can Samsung compete with companies that sell products at cost? Adenan Ahmed Adnaan, an analyst at Berenberg Bank in London, said investors should question its sources of growth. Samsung's response to the dilemma could have an impact on the smartphone market as a whole. If Samsung were to take the initiative to reduce sales, it could pose price pressures on companies such as Nokia, HTC and Motorola Mobility. This could lead to a decline in product quality or a contraction in the profit margins of the smartphone industry as a whole. In fact, only Samsung and Apple's two smartphone makers have been profitable in recent quarters. The low-end market in high-end markets is not the only concern for Samsung. In the high-end market, its rival Apple is still increasing iphone sales. Michael Walkley, an investment banker Canaccord Genuity analyst Michael Walkley, said Apple would be more successful if it were to launch a bigger screen-size handset this year. Samsung has yet to show signs of price cuts and the company has refused to allow executives to be interviewed. However, Samsung said in a written statement that they would continue to compete with rivals by diversifying their products to meet consumer demand. We will also enhance the competitiveness of our products by strengthening our first-class brand reputation, strong product line and cutting-edge technology. The company said. In other words, at least for now, Samsung will continue to use the same approach: offering a variety of mobile products and a wide range of prices. But it is not clear if this is enough to help it develop healthily. Pattern change American market research firm Creative StratBen Bajarin, a egies consumer technology analyst, Ben Bagalin that the competition in the Android camp has begun to change. Most of Samsung's equipment and China's Low-cost handsets use this system, but because all of the Android system usage patterns are very similar, so the hardware can not make the device stand out. The real difference is streaming media video or messaging software and network services. The rapid rise of millet is a typical example. The company has launched a variety of Android smartphones, including features similar to those of Apple and Samsung's high-end devices, but only half the price. But in the competitive advantage of millet, hardware and low price only accounted for a small proportion. To attract users and enhance their loyalty, the company developed a custom version of Android called MIUI. Users can participate in the MIUI design by providing online feedback, and the company will launch a new MIUI system every Friday, giving fans a regular surprise. The business model of Millet is unique among Android handset makers: The company's products sell at roughly the same cost as their costs. Their phones, however, sell for up to 1.5 of the time, waiting for their parts to be lowered. Millet can also make money by selling apps, games, Android themes and internet services. The company has said that making money through Internet services will become the core business strategy for millet. The phone is actually 20 years ago pc. Lin, the founder of Millet, said at a business meeting last year that the profit margins at the beginning of the PC were high, but now they have dropped to single-digit numbers. Smartphones will go through the same process. So we're not focusing on the devices that profit margins are falling, but about services. Future prospects However, Samsung's smartphone business still relies heavily on hardware. While the company also uses a custom version of Android on its smartphones and tablets, its software has been widely criticized by commentators and customers. And in the area of Internet services such as maps and online chats, Samsung has almost no achievements. Samsung has been working with Intel and other companies to develop an operating system called Tizen. But Berenberg's Ahmed expects Tizen to fail because other operating systems have failed before, including Palm's webOS and BlackBerry 10. He believes the company could end up being forced to cut prices, sacrificing profit margins. In the past, Samsung has been playing a price war in a shrinking market share. Why does history not repeat itself, Ahmed says? Bajarin said that most of Apple's profits also came from hardware, but it was different from Samsung. To stand out from the competition and maintain customer loyalty, Apple has developed an exclusive operating system and Internet service. The difference is that Samsung users can change to other manufacturers of Android phones at any time, after logging on to Google services, they can enjoy the almost identical experience. If you can spend less money buying other Andoird phones,But it can achieve almost the same experience, why not? It's really hard for them. Bajarin said that the user actually belongs to Google, does not belong to Samsung. (PEI)