Samsung Galaxy S9 Not Selling as Well as Expected

Posted on July 31, 2018 by Paul Thurrott in Android, Mobile with 29 Comments

Samsung on Tuesday admitted that its latest smartphone flagship, the Galaxy S9/S9+, is not selling as well as its predecessor. The results mirror a general slowdown in the smartphone industry, and they come ahead of Apple’s next earnings announcement, which will of course provide iPhone sales numbers for the same period.

Samsung posted an operating profit of $13.3 billion on revenues of $52 billion for the quarter ending June 30. Those are solid numbers—profits rose 6 percent while revenues fell 4 percent—but Samsung’s stock is heading down because of the firm’s warnings on smartphone sales.

“Second quarter revenue fell due to softer sales of smartphones and display panels, despite robust demand for memory chips,” Samsung noted. “The continued strength of the company’s memory business contributed to the higher operating profit.”

Noting the “stagnant” smartphone market—late last year, you may recall, marked the first time that sales didn’t grow year over year—Samsung says that the division responsible for the Galaxy line of devices reported “a drop in earnings, both year-on-year and quarter-on-quarter. And it specifically blamed “slow sales of the Galaxy S9.”

Uh-oh.

Looking forward, Samsung does offer some hope for improvements: Customers are choosing devices with more storage, which are more expensive and more profitable. And sales should improve in the second half of 2018, thanks to a normal seasonal uptick.

But with competition “intensifying”—Apple is rumored to be readying three new iPhone models for this fall—Samsung will introduce its new Galaxy Note 9 “earlier than usual,” and the device will offer customers “exceptional performance for a reasonable price,” the firm says. Indeed, lowering prices across the board seems to be part of the overall strategy going forward.

That’s smart. As I repeated yesterday, Google continues to price itself out of the competition when it comes to smartphones. And even Apple hasn’t been able to sell as many iPhone X smartphones—at $1000 per unit—as it had expected. Perhaps the entire industry will do a little reset this year.

 

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Comments (31)

31 responses to “Samsung Galaxy S9 Not Selling as Well as Expected”

  1. Avatar

    beckerrt

    Not too much of a surprise, really. If Samsung can wow everyone with a truly nifty S10 next year, I would guess their slowing sales would stop, at least for a while. These things just aren't that exciting any more.

  2. Avatar

    bradreiter

    Samsung turned me off with their product abandonment. i don’t want to drop that much money on a phone that won’t get upgrades. With their custom software they are late on receiving the latest updates. It’s also hard to tell if you’re protected from the latest security issues. Say what you will about the price of google and Apple hardware, their software update cycles extend the lives of their devices significantly and lower the cost of ownership over that lifespan.

  3. Avatar

    Awhispersecho

    Releasing a flagship Galaxy S line of phones 11 months apart and throwing in your flagship Galaxy Note line of phones in the middle of that is a sure way to cannabalize your own sales. They need to either release them at the same time, once a year or eliminate and/or combine the 2 lines of phones. There is only so many people looking to upgrade to a new flagship which are essentially being released every 6 months. Not to mention there is absolutely nothing a Galaxy S9 or Galaxy Note 9 has or will have that would make someone think they needed to upgrade unless they are already due. Not to mention the Samsung bloat and all their own software that they load onto these phones. It's really got me seriously considering moving away from Samsung and my Note 8 sooner rather than later.

  4. Avatar

    Stocklone

    I have this phone. A couple things continue to irk me about it so I haven't really gone out of my way to recommend it to anyone else. Samsung doesn't seem to want to fix any of the issues either. Plus with all the phones that are much cheaper and do nearly as much why would I tell any normal non-tech person to buy it? They aren't going to appreciate that extra 5% better over a cheaper phone. Even with all the money saved with a trade-in, I question if I paid too much.

  5. Avatar

    Michael Sorrentino

    Well, what did they expect? This is the same company that introduced exploding washers and Note 8 batteries! How could they expect people not to be just a bit wary? Also, pretty much everyone who wants a smartphone has a smartphone, people aren't going to go out a buy new ones just cause the company says to.

  6. Avatar

    Patrick3D

    I had no idea the S9 had released already. None of the tech people on Youtube that I follow ever mentioned it. Makes me wonder if Samsung had changed marketing strategies. I've seen they had some ads dissing Apple but did not make any connection to those having anything to do with a release. I'm happy with my $159 Nokia 3.1 anyways.

  7. Avatar

    BeckoningEagle

    There is simply no reason to upgrade. I have a Note8 and an S8 and they are almost as powerful as the S9. I like the fact that these phones are very well built though, but all the Samsung duplicitous bloat is really annoying, I may switch to the Pixel 3 once Paul has vetted it.

  8. Avatar

    Jay

    The re-sale value isn't that great compared to iPhones.

  9. Avatar

    CaedenV

    Does this news surprise anyone? Samsung makes solid phones, but what about them is $1K worthy? Especially when you get Chinese and Korean manufacturers with extremely nice devices for $500. The cameras are not quite as nice as Samsung, but the displays and build are excellent, and they push out security and software updates quickly where many Samsung devices are several months behind (if they get updates at all). The rich market goes with Apple, the enthusiast market is going with these other more interesting brands, and normal people simply dont (and never have) paid that much for smart phones. The value proposition to take photos, sent messages, and play a few games just does not warrant the $800+ price tag of these devices... They are nice devices, but the utility simply is not there when the cheaper devices do all of the same things (if just a little bit slower).

  10. Avatar

    Daekar

    It shouldn't be a surprise that they're not outselling the S8. It was a game-changer that stimulated a lot of people to jump on board the Samsung train and triggered earlier upgrades. Since the S9 appears on the outside to be S8 Part Deux, anyone with a brain saw this coming.

  11. Avatar

    jrickel96

    Android has a major problem with the declining prices. This year the average selling price for an Android device is likely to drop below $200. Samsung's average price is dropping as well and it is closer to $250. That tells you how bad the margins are for all other companies in the Android segment. As sales decline, OEMs will be pinched out. The high end Galaxy line will continue to be in decline. The iPhone will likely see the same issue, but it will be far less of a problem since Apple's average transaction price for phones is near $750.


    How much hardware will disappear from the market over the next few years in the Android space? Will usage decline as well as users seek to restore some balance to their lives? If privacy laws hit Google's bottom line hard, will they spend less resources on updating Android?

  12. Avatar

    shameermulji

    Saw this today as well:


    "Samsung's answer hinges on what it sees as a game changer. The company plans to release a foldable smartphone early next year, possibly the first of its kind, to celebrate the 10th anniversary of the Galaxy series."


    http://www.patentlyapple.com/patently-apple/2018/07/while-samsungs-q2-smartphone-operating-profits-fell-sharply-they-begin-to-officially-play-up-their-future-folding-smartphon.html

  13. Avatar

    Rob_Wade

    I just don't find anything compelling about any devices out there. First, I only like Windows phones. Second, the cost-vs-features simply don't translate to a good value for me. I still love the camera on my Lumia 1020, I can still do all the things I want to do on it AND Cortana is unmatched in ways I need. Why pay the ridiculous prices for a device that looks ugly to me, brings nothing new to the table for me, and runs operating systems that are horrible in my opinion? If everyone else is fine with them, great...let 'em enjoy the newer devices.

  14. Avatar

    madthinus

    The S8 cycle was a really big upgrade cycle for Samsung. They moved a lot of devices to the Note 7 customers. It is not surprising to see lower than anticipated numbers. Upgrade fatigue combined with the lifecycle of longer than 24 months on a smart phone is catching up with them. One can also point to the fact that the S9 offered little in value to upgraders.

  15. Avatar

    ponsaelius

    Samsung crapware and bixby put me off paying a premium for unwanted rubbish.

  16. Avatar

    RM

    As I see it, Intel and AMD (others?) are to blame for high phone prices because they are not able to compete with the Snapdragon processors. Processors for phones could be priced a lot lower for the same performance if there was adequate competition.

    • Avatar

      jrickel96

      In reply to RM:

      Average selling price of an Android phone is around $200. The Galaxy line is a small fraction of total Android sales. There's tons of competition in the market, but the higher end handsets in Android are priced so highly to allow for the low to no margin phones on the bottom of the market.


      The Snapdragon 845 is not all that expensive. Exact pricing isn't known, but it is going to be cheaper than an Intel Core i3 by a wide margin, especially at volume. There are other aspects that cost money in phone design - memory, storage, antennas, shielding, the screen, etc. But the margin on the high end devices is excellent. A mid-range or low-end Snapdragon will not cost so little it will make up for the margin on a high end device.


      Intel chips would also do poorly for a device like a phone. RISC chips make more sense for those devices and all the legacy x86 stuff built into the Intel chips would be unnecessary.


      Cheap phones are to blame for high phone prices. If every phone were priced at around $500 then there'd be decent pricing everywhere, but the high end subsidizes the low end to allow for a great proliferation of devices. If sub $200 Android phones did not exists, hundreds of millions of people would not be using smartphones. The hope on the lower end is that users will eventually want something better and pay more for their next phone.

  17. Avatar

    Jeffery Commaroto

    A consumer used to be able to get a flagship phone subsidized for a one-time $200 fee (plus activation and other hidden fees) for the “new one.” Now it costs $700+ (And other fees) either paid in full or as a monthly fee. Shocker, phone sales have slown down.


    Yes the cost used to get buried in the contract. I suspect that contract price didn’t suddenly nosedive when they made the change for most consumers. They likely just changed the name of the plan and danced around to hide the costs and make it look like a deal.


    Meanwhile new phones don’t really offer a lot of difference from older phones. The rate of innovation has slown. Unless the current phone stinks and is dying or the crack in the screen is just unbearable, it is likely people will hold onto phones longer instead of pay $700 plus each year or every two years.

    • Avatar

      Daekar

      In reply to Jeffery_Commaroto:

      That was the brilliant thing they did. Claim that they were separating out the cost of the phones while leaving plan prices the same. I was amazed that the tech press didn't call them on that BS when it was happening.

    • Avatar

      jchampeau

      In reply to Jeffery_Commaroto:

      I think it's your latter point that's causing sales to slow as opposed to the former. When AT&T changed their plans around to separate out the cost of the device, I bought an iPhone 6S from Apple and used their interest-free financing. That with the AT&T rate plan change resulted in a net reduction in monthly spend for me. I did all my research up front and walked in knowing what I wanted to do, and obviously not everyone does that, but I think most people probably don't make their buying decisions based on small increases or decreases in monthly cost. That's just a hunch, though....I could be wrong. I thought I would turn into an "annual upgrader," but in fact the opposite has happened: I still have the iPhone 6S and it's coming up on its third birthday.

  18. Avatar

    arknu

    Given that this phone is basically identical to the S8, that can hardly be surprising.

    But you can always be hopeful that people have had enough of Samsung duplicating every single app on the phone just so they can put "Samsung" in it somewhere. And take a year to push out Android updates…

    I always advise against buying Samsung phones, no matter what, due to the terrible software. The hardware is good, but they ruin it with their shitty software. Just imagine an S9 with stock Android (like Nokia phones have)...

    • Avatar

      christian.hvid

      In reply to arknu:

      There's been some speculation that Samsung is looking to replace Android with their own Tizen OS at some point. To make this possible, they first need to establish their own ecosystem of apps and services, essentially duplicating everything that Google offers as part of the Android experience.


      But with most consumers hating the Samsung apps and services, and with Tizen apparently going nowhere beyond TV:s and home appliances, maybe Samsung should just call it quits and concentrate on making great hardware? I couldn't agree more that an S9 with stock Android would be pretty awesome *).


      *) For people who don't mind the glass back of course.

  19. Avatar

    christian.hvid

    I wonder if it's the high price that's putting people off, or the combination of high price and just too damn much glass? I'd be happy to spend €800-1000 on a flagship phone if I know it's going to last three years. If I believe it's going to be broken within six months, not so much.

    • Avatar

      jchampeau

      In reply to christian.hvid:

      I worked with a guy for two years and in that time, he broke the screens on his company-issued iPhone, his company-issued iPad, and his personal Moto Droid. I turned 40 this year and have been a smartphone user since the early days (Palm Treo), and have never broken--or even really damaged--a mobile device. I usually give my old devices away to others when I'm done with them and when I take the case and screen protector off, they're good as new or close to it. What do you do differently with your devices such that you think you might break yours within six months?

      • Avatar

        christian.hvid

        In reply to jchampeau:

        Actually, I personally almost never break my phones, although I'm the one ending up paying when someone close to me does. :) It's more of a general observation: a tool that you're supposed to rely on all the time, in any conditions, should be able to survive without extra protection. Put differently, any product should be made to endure the conditions it's intended for.


        To an extent, smartphone manufacturers have achieved this by providing some level of water and dust proofing on most devices. But they are also working in the opposite direction by putting slippery glass on all sides of the phone, which means you're not only bound to drop it, but it's also bound to break no matter which side it lands on. The whole glass back thing is just so utterly pointless, but I guess it'll take some very expensive class action lawsuits before manufacturers concede this and revert to sensible materials.

        • Avatar

          wright_is

          In reply to christian.hvid:

          I totally agree. I have a Mate 10 Pro and a P20, my wife the P-Smart (all Hauweis). The P-Smart has a aluminium back, the other 2 glass. They are so slippery to be nearly unusable. I've taken to putting them in the supplied silicone case.

          If the manufacturer thinks you need a silicone case, I think they are admitting that there is something wrong with the design! (The P-Smart doesn't have a silicon case in the box.)

          • Avatar

            christian.hvid

            In reply to wright_is:

            I don't want to be cynical, but one could very well make the case (morally, if not legally) that manufacturers are

            a) encouraging users to skip the case by making the back of the phone as attractive as possible (the rainbow colored P20 is a good example), and

            b) making it as easy as possible to drop the phone by making it in the shape and texture of a soap bar.

            With a list price of $600 for a back glass replacement (iPhone X), this could make for a wildly profitable aftermarket.

  20. Avatar

    David Berk

    I simply think that people don’t need to replace their phones as frequently any longer. It still works, pure comfortable using it, no need to upgrade.

    While their retail price on the S9 and + is high, the phones have had fire sales every single week since launch in the US. $200 to $350 off the retail price every single week at some retail outlet in the US.

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