Samsung’s biggest fear illustrated in just one graph

Samsung Smartphone Profits Analysis

Every report we’ve read about Samsung’s corporate culture paints the company as being in a constant state of panic, as its CEO refuses to let his employees rest on their laurels and is always pushing them to think of new ways to increase its operating margins. If Samsung was in a state of panic back when the company was still posting record profits, then we can’t imagine what the atmosphere is like now that the company posted worse-than-expected earnings over its last quarter.

Asymco’s Horace Dediu posts the following graph that shows why Samsung may be right to panic a bit about smartphone profit margins in a mobile market that has become over-saturated.

samsung-mobile-profits-chart

As you can see, Samsung’s sales of telecom products, which include its hugely popular Galaxy S and Galaxy Note smartphone series, are pretty much single-handedly responsible for transforming the company into one of the consumer electronics industry’s biggest players. Take away those monster profits and you’ve got a company that’s still a profitable component supplier but not a powerhouse on par with Apple or Google.

This explains why Samsung is investing money in making its own smartphone platform and why it’s rushing out the door to be first to market with wearable computers such as smartwatches: It’s smart enough to see that its smartphone profits may have peaked and it’s looking for a new “next big thing” that will keep its growth chugging along. And no, Samsung is not “doomed” by any stretch of the imagination but it’s certainly going through a period of adjustment.

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