Samsung’s cushion is shrinking: Profits drop as demand for components drops

A woman looks at Samsung Electronics' Galaxy Note5 at the company's showroom in Seoul on January 28, 2016. Slowing global demand for smartphones as well as memory chips dealt a blow to Samsung Electronics as it reported a 40 percent on-year drop in fourth-quarter net profit. AFP PHOTO / JUNG YEON-JE

Some years ago, Samsung’s dominance over the Android market was such that whenever you thought of Android, the first thing on your mind was Samsung phones. 

But now, with the emergence of lower-priced rivals, that has changed. Although Samsung still dominates, it is less of a monopoly over the Android market and more of a large piece of the pie. The demand for smartphones has been shrinking, and in markets like China, growth is slowing fast.

That has an impact everywhere. Apple is predicting a drop in sales for its iPhone division, and now Samsung has announced that the operating profit has fallen 36% because of falling demand for components.

The component business has long been Samsung’s cushion, as even when its smartphone business started slowing down, the component business raked in money as usual.

In any case, smartphone market growth isn’t going to get faster, and these things are only going to happen more and more frequently. These companies should quickly find new cash cows to leech onto. What do you think?


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