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Samsung profits dip as users hold onto smartphones longer

Changes in smartphone purchasing trends have hurt Samsung.

Samsung released the Galaxy Note 8 in the last two weeks of the third quarter of 2017, around the same time as Apple released its three latest iPhone versions 8, 8 Plus and X. Samsung mobile sales decreased by 6% for the quarter. Why? Because sales of cheaper mid-range and low-end smartphones increased compared to those of their more expensive high-end counterparts, and because of a decline in LTE investments from major overseas customers, Samsung said in its Q3 2017 earnings report.

The biggest problem for Samsung profits in the mobile market, however, is that consumers and business users alike keep their phones for about 18 months to two years these days, so there are fewer buyers for the company’s newer, higher-end phones, said analyst Jack Gold, principal and founder of J. Gold Associates in Northborough, Mass.

“The real issue in the mobile space is that people keep their phones longer,” Gold said.

End users used to buy every new model of a phone because the software and features were significantly better, which is still true between low-end models. The higher-end smartphones, however, don’t update features enough to make users want to buy the latest version.

Samsung may have more competition in the mid to low-end smartphone market, but its devices such as the Galaxy J7 maintain strong global popularity, according to Counterpoint Research. Samsung has difficulty competing against Apple’s iPhone 7, 7 Plus, 8, or 8 Plus with the Samsung Galaxy S8, S8 Plus or Note 8 in the USA high-end smartphone market, the firm said.

The dip in Samsung mobile earnings came from a lack of a new high-end smartphone for most of the third quarter, Gold said. The Galaxy Note 8 came out in mid-September.

“The Galaxy Note 8 is not brand new anymore, so the numbers are going to slip a bit,” Gold said.

Galaxy Note 8

Samsung Galaxy Note 8

As the largest provider of Android devices, Samsung is an established company in the mid to low-end smartphone markets, but most organizations support higher-end smartphone models for business users. Samsung is making a push to invest in next-generation technology — mostly 5G devices — as an attempt to appeal more to the enterprise market, the company said. Still, those devices could be a far way off.

“5G still has about two to three years before it hits the enterprise because there aren’t enough things like 5G cell towers to support widespread use,” Gold said.

Samsung Electronics CEO and vice chairman Kwon Oh-hyun stepped down in October, and the company announced three new CEOs will take over: Kim Ki-nam for components, Kim Hyun-suk for electronics and Koh Dong-jin for mobile and IT.

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