Korean technology giant Samsung had its best quarter in two years in the second quarter, with operating profits up 17% over last year. This is attributed to the success of its S7 smartphone as well as its lower-end phones. However, anticipating a third-quarter slump in the global smartphone market, analysts say the company may need to shift its focus to lesser-known products, such as its memory components and screen technology.
As Korean securities brokerage Shinhan Investment Corporation suggested in a report, a potential slump in smartphone sales could be “offset by improving earnings of [Samsung’s] semiconductor division and Samsung Display”.
In the first quarter of 2016, Samsung held the lead in smartphones with a 25% global market share. American rival Apple had a 15% market share, selling about 10 million fewer units. Samsung lost ground to Apple in important Asian markets after the former released its iPhones with larger screens. However, using its new OLED (organic light-emitting diode) screen technology in its own phones gave Samsung a production advantage. The technology uses OLEDs to create thin, flexible screens, giving the Galaxy S7 Edge its curved edges.
Samsung’s OLED technology could pay off in more ways than one, as an increasing number of mobile phones are expected to use this type of screen. Analysts at Morgan Stanley say they expect Apple to adopt the technology in 2017. Samsung is reportedly stepping up OLED production, converting plants that once produced LCD panels, the New York Times reports.
Where Samsung has had difficulty is in competing with lower-cost Chinese phone makers in developing markets, particularly China. But if it leverages its dominance in screens and chips, Samsung can likely profit by selling pricey components to those companies. Further, it will be difficult for China’s smartphone makers to outperform Samsung in profitable mature markets.
“Outside of China, many of these brands are virtually unknown and the ability of these rapidly growing Chinese vendors to gain entry into mature markets such as the United States and Western Europe will be essential if they have aspirations of catching Apple or Samsung at the top”, IDC research manager Anthony Scarsella said in a report.