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Why there’s almost no chance Samsung will leave the smartphone market soon

Why Samsung Will Keep Making Smartphones

Earlier today, we highlighted some recent analysis by Creative Strategies principal analyst Ben Bajarin, who wrote convincingly about the “innovator’s dilemma” that Samsung is facing when it comes to its smartphone business. I found Bajarin’s overall analysis to be very sharp but I think he makes a huge leap of logic that he doesn’t come close to substantiating when he flatly predicts that “Samsung will be out of the smartphone business within five years.”

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Here’s the thing: Samsung’s days as a hugely profitable Android smartphone vendor are definitely over. Android smartphone hardware has become commoditized and there’s no way Samsung will ever again reach the mobile device margins that it had in its heyday of 2012 and 2013. Despite this, Samsung isn’t going to stop making smartphones.

The reason I say this is simply because Samsung makes plenty of low-margin hardware for products that have been commoditized for far longer than smartphones have. We don’t think of laptops, TVs, vacuum cleaners or refrigerators as high-margin products anymore — yet Samsung still makes all of them. Why would smartphones be any different?

Additionally, there are several companies out there who probably should have given up on making smartphones by now but who have stubbornly persisted. BlackBerry and HTC are still releasing new smartphones in the hope that something will finally click. Even Nokia, which famously unloaded its hardware division to Microsoft in its acquifire of CEO Stephen Elop, is reportedly considering getting back into the game with an Android handset next year. For some reason, vendors just have a really hard time giving up on making smartphones, even if it would be in their best interest to do so.

Now, I’ll be the first to admit that Bajarin is a lot smarter and more well connected to the industry than I am. There may be a specific reason why Samsung would exit the smartphone business while staying in the business for PCs, televisions and assorted household appliances but Bajarin needs to explain why this would be the case in order for his prediction to make any kind of sense. So barring any additional information I don’t know about (and I’m willing to admit there’s a lot of that!), I find it hard to believe Samsung will actually exit the smartphone business in five years.

Prior to joining BGR as News Editor, Brad Reed spent five years covering the wireless industry for Network World. His first smartphone was a BlackBerry but he has since become a loyal Android user.