Samsung's top executive predicted the Korean technology conglomerate will face weaker global economic conditions as it enters 2016, as well as intensifying competition in key markets including smartphones and chipsets. "The territories of industries are collapsing," said Kwon Oh Hyun, Samsung's vice chairman and co-CEO, in a speech distributed to media and cited by Bloomberg. "We have to compete in a new way that we've never experienced in the past."
Importantly, Kwon said that the "competition landscape is changing to software and platforms, so we need to build a new system and competence." Those comments appear to reinforce the notion that Samsung plans to dedicate more resources toward its software products rather than on new hardware innovations. That's an important change for a company that built its leading position in the global smartphone market on the strength of its hardware prowess while obtaining much of the software and services in its phones from Google's Android platform.
Although Kwon didn't provide any specific sales forecasts for 2016 in his speech, analysts are predicting that Samsung is facing stiff headwinds. The company is scheduled to report its most recent quarterly earnings this Friday, and according to Thomson Reuters, the company is expected to post an 8.1 percent decline in its operating profit when compared with the previous quarter.
Indeed, Bloomberg reported that financial analysts expect Samsung's net income in 2014 to be the company's lowest profit in four years.
It's also worth noting that investors appear similarly worried about Apple's 2016 prospects; Apple's stock ended 2015 down 4.6 percent, its first such drop in seven years, as the WSJ noted.
Likely in response to its changing fortunes, Samsung last month replaced the head of its mobile business, J.K. Shin, with a longtime Samsung executive who helped usher in the company's mobile payments and enterprise software efforts, a move that analysts believe may signal a shift within Samsung away from hardware innovations and toward new offerings based on software and services. Samsung replaced J.K. Shin with D.J. Koh, a 54-year-old executive who joined the company in 1984 and who has worked in research and development in Samsung's mobile business since around 2007.
Globally, Samsung is facing challenges from Apple in the high end of the smartphone market and Huawei to Xiaomi on the low end. Already, Huawei said its revenue from smartphones and other consumer products likely jumped about 70 percent last year, a senior executive told the WSJ this week.
Overall, according to research firm Strategy Analytics, Samsung commanded 23.7 percent of the global smartphone market in the third quarter, ahead of rival Apple's 13.6 percent. According to the firm, Huawei came in third in the global smartphone market with 7.5 percent market share.
Samsung is widely expected to announce the successor to its Galaxy S6 flagship smartphone at next month's Mobile World Congress trade show in Barcelona, Spain.
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Samsung's new mobile chief, D.J. Koh, seen refocusing on software and services