Samsung Leads Smartphone Market

Samsung reported record profits during its most recent quarter, thanks in part to strong sales of the Galaxy S4.
Samsung Unleashes New Mobile Devices: Visual Tour
Samsung Unleashes New Mobile Devices: Visual Tour
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Samsung Friday reported record profits of $7 billion for the second quarter, up from $4.66 billion during the year-ago period and up from $6.4 billion during the first quarter. Samsung said much of its profit was generated from sales of its Galaxy smartphones.

Together, cellphones and telecommunications gear accounted for the two-thirds of Samsung's profits, though margins on its mobile gear business dropped a bit due to increased expenses. Samsung has spent a small fortune advertising its smartphones and tablets. Memory chips, processors and displays made up about 31% of Samsung's profits for the quarter.

Samsung does not report smartphones sales, and analyst firms don't agree on exactly how many Samsung sold. Strategy Analytics believes Samsung sold about 76 million, while IDC believes Samsung sold about 72.4 million. Either way, Samsung trounced second-place Apple by more than double. Apple reported second-quarter sales of 31.2 million iPhones earlier this month. Much of Samsung's success can be attributed to sales of the Galaxy S4, which alone was responsible for one-third of Samsung's quarterly smartphone sales.

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But Samsung issued a warning. It believes the average selling price of its devices will take a dive during the third quarter as sales of its top-end models dip while lower-cost models begin to pick up the slack. Further, it sees a slowdown in overall growth of its smartphone business on the horizon. "The smartphone market will likely continue to grow in the third quarter but there's a chance that the pace of growth may slow as competition intensifies with new model releases," said Kim Hyun-joon, VP of the mobile business.

The company's position in the smartphone market is unassailable at the moment. According to IDC, Samsung's sales of 72.4 million smartphones give it 30.4% of the entire smartphone market. Samsung's next-closest competitor is Apple, which posted sales of 31.2 million iPhones, giving it a 13.1% slice of the smartphone market. Both Samsung and Apple saw their individual shares of the smartphone market dip compared to the year-ago period, however, thanks to increased competition from the likes of LG, Lenovo, ZTE, and others.

"Market opportunities exist at all levels, including the high end," said Ramon Llamas, research manager with IDC. "While Samsung and Apple accounted for significant share of the overall market, they were not the only vendors active in the high end of the market, and recent device introductions and upcoming launches signal more vendors targeting this space. Comparisons will certainly be made to the flagship Galaxy and iPhone models, but clearly the competition refuses to be shut out altogether."

LG is prepared to announce its new flagship smartphone in New York early next month. LG sold 12.1 million smartphones during its most recent quarter thanks to a better mix of low-, mid-, and high-end devices. LG holds about 5.1% of the smartphone market.

Companies such as HTC, Motorola, Sony, Nokia and BlackBerry, all of which used to rank high in smartphone market share, are nowhere to be seen.

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