To halt smartphone slide, Samsung rewrites playbook

Sun May 22, 2016 10:45pm EDT
 
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By Se Young Lee

SEOUL (Reuters) - From the way it chooses smartphone components to the models it brings to market, Samsung Electronics (005930.KS: Quote) has undergone a painful process of breaking from its past to reverse a slide in its handset business.

For example, the world's largest smartphone maker agonized over camera specs for its flagship Galaxy S7 until the last moment - ultimately defying industry convention by opting for fewer pixels in exchange for improved autofocus features and low-light performance, a move that contributed to early success.

It also pared back its product line-up, overcoming internal resistance, enabling it to streamline production, an executive said.

The handset business has now stabilized, and had its best profit in nearly two years in January-March, though historically low smartphone industry growth still leaves Samsung looking for the "next big thing".

"We've now gotten to a point where we can secure a baseline profit even if the market stagnates, so long as we don't make a bad mistake," said Kim Gae-youn, vice president in charge of Samsung's smartphone product planning. "I'm confident we can hold our ground."

After peaking in 2013, a sharp drop in mobile profits exposed Samsung as slow to adjust to the changing market: its budget devices were overpriced and unappealing versus Chinese offerings, and the 2014 version of its Galaxy S flopped.

That prompted a cull among executives and stoked investor worries Samsung might not be able to recover as rivals including Apple (AAPL.O: Quote) and China's Huawei Technologies [HWT.UL] and Xiaomi [XTC.UL] gained market share at its expense.

There was no sweeping, across-the-board fix. Rather, Samsung embarked two years ago on an overhaul that included a shift from a phone-for-all-needs approach towards a line-up that emphasized economies of scale.   Continued...

 
A model poses for photographs with Samsung Electronics' new smartphone Galaxy S7 during its launching ceremony in Seoul, South Korea, in this March 10, 2016 file photo.  REUTERS/Kim Hong-Ji/Files - RTSCR76