Can The Galaxy S6 Turn Around Samsung’s Smartphone Business?

SSNLF: Samsung Electronics logo
SSNLF
Samsung Electronics

Samsung Electronics (PINK:SSNLF) unveiled a pair of flagship smartphones – the Galaxy S6 and the Galaxy S6 Edge – as it looks to revive its fortunes in the smartphone market following a difficult year that saw it cede significant market share to Apple (NASDAQ:AAPL) and lower-cost rivals. Design will be a key selling point of the new handsets, which will feature an all metal and glass enclosure, marking a departure from Samsung’s signature plastic handsets. The company has also made improvements on the software front, by streamlining its Touchwiz user interface and removing many of its oft-criticized proprietary applications. Samsung hasn’t skimped on features either – offering higher resolution screens (the S6 Edge has a screen that is curved at two edges), higher built-in memory, more battery efficient processors and a better camera compared to the Galaxy S5. While the pricing for the S6 – which will go on sale starting April 10 – remains unconfirmed, we believe that it will be roughly in line with previous Samsung flagships. If some early hands-on reviews and first impressions of the S6 are any indicator, Samsung could have a relatively promising device in its hands. That brings us to a key question – will the S6 be able to turn around Samsung’s mobile fortunes?

Trefis has a $1,285 price estimate for Samsung, which is slightly ahead of the current market price.

See Our Complete Analysis For Samsung Here

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Strategic Shift Is Encouraging

While it might be too early to give a definitive answer to the question, the Galaxy S6 indicates that Samsung is learning from its mistakes and that its design and product strategy are headed in the right direction. The company appears to be broadly doing away with many extraneous features and focusing on what matters to the core user experience of a smartphone. Samsung has also taken some relatively small, yet meaningful strategic decisions to improve margins and product differentiation in a crowded smartphone market. For instance, the device will use the company’s own 64-bit Exynos applications processor (replacing Qualcomm’s Snapdragon chips), manufactured using the much anticipated 14-nanometer process. This should give the company even more control over the components used in its handset, while helping to bolster margins. The company has also dropped the Micro SD card slot (for user-expandable memory) on the device, in a move that could steer customers towards higher margin high-capacity offerings. The S6 is also outfitted with technology that will support Samsung’s new mobile payment service Samsung Pay, a competitor to Apple Pay, which is expected to roll out in the United States and South Korea this summer. (related: Why Samsung Is Entering The Mobile Payments Fray)

To be sure, the smartphone market momentum has not been working in Samsung’s favor over the last year. During Q4 2014, the company’s smartphone market share fell to 20% down from about 29% a year ago, as Apple significantly closed the gap with a 19.85% share. [1] However, the smartphone markets are very dynamic and perception-driven, and a flagship product that can excite customers while bringing in volumes and profits could help to reverse the company’s fortunes. If the S6 is a hit, it could help Samsung shake off its image of being something of an also-ran in the smartphone space, potentially sprucing up its brand cachet.

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Notes:
  1. In a Near Tie, Apple Closes the Gap on Samsung in the Fourth Quarter as Worldwide Smartphone Shipments Top 1.3 Billion for 2014, IDC, January 2015 []