The smartphone landscape has inarguably changed over the past eight years. And it might be changing again right now; enough that one analyst suggests that Samsung will abandon the smartphone market within the next five years.
On the Tech.pinions site, Ben Bajaran is making this prediction in no uncertain terms. He makes some valid points, with the main one being this:
“Android’s new premium price point is between $300-$400 and the new mainstream Android smartphone price point is under $300. No other Android OEM, Samsung included, will sell in volume anything above those prices. At those prices, cutting edge innovation will be void, meaning the gap between iPhones and Android will grow.”
Indeed, we’re already seeing this phenomenon, as well as its effects on Samsung.
For $379 you can get a very capable Moto X Pure Edition handset, for example, complete with what considered high-end chipsets, image sensors and display technology. Google’s new Nexus 5X is also impressive with a $399 starting price. And there are plenty of other examples these days.
Compare either of those to a Samsung Galaxy S6 or S6 Edge and the first difference that jumps out is the price: You’ll be spending $700, $800 or more for a flagship Samsung handset.
Samsung knows this, which is why it is spending more attention on the less expensive low- to mid-range markets, which generate far less profit per handset.
Yesterday, I noted the importance of these cheaper phones, with Samsung’s overall smartphone product mix reflecting the change: Galaxy S sales make up a smaller percentage of the company’s smartphone revenues compared to the mid-range Galaxy J. That’s a good strategy only if you can make up the revenue per handset shortfall through greater volume of the less expensive product.
Even there, however, there’s far more competition than there was just a few years ago. Look at Huawei, Xiaomi, Asus and many other Google Android hardware partners and you’ll see vast number of comparable devices at or below cost of a Galaxy J.
Samsung was surely instrumental in the quick uptake of smartphones around the world, but Barajin says innovator’s dilemma is catching up to the company.
“Once the market embraces good enough products, the innovator can no longer push premium innovations as their value is diminished once a good enough mentality sets in. Android devices in the $200-$400 range are good enough for the masses leaving Samsung’s $600 devices and above stranded on an island.”
Although what will happen to Samsung five years from now is beyond my vision, I see where Bajarin is coming from.
In fact, my own handset purchase decisions have reflected that as I bought the less-expensive Moto X in 2013 and again in 2014, even though the phones didn’t completely use high-end components. Instead, they provided me with a high-end experience for less.