Samsung Warns of Economic Struggles in 2016

Samsung warns of struggles in 2016, including weak economy and more competition

By David Curry January 5, 2016

samsung grim 2016 outlook — tktktk/123rf

Samsung plans to announce its fourth quarter results tomorrow, but forecasts are already being lowered, after the tech giant said it expects a hard 2016.

In a statement made on Monday, found by Reuters, Samsung chief executive Kwon Oh-hyun said global growth will continue to slow. Weak economic conditions and increased competition will factor into the struggles for 2016, especially in key product areas such as smartphones and memory chips.

Samsung has been pushed out of a few markets by new providers, and we expect Xiaomi, Huawei, and Lenovo to make even larger gains this year. All three Chinese manufacturers are eyeing up the Middle East and Africa — after Huawei surpassed Samsung to become the No. 1 vendor in China.

At the high-end, Samsung is getting crushed by Apple, while other Android suppliers lower the prices of premium flagships to under $500. This might force Samsung to lower prices on its flagship model next year, or increase production of midrange devices.

In the semiconductor business, Samsung is also starting to see more competition. Qualcomm, Intel, and MediaTek are scooping up more manufacturers in Asia, and Apple might be looking to drop Samsung from the A10 production this year.

Samsung does have some glimmers of hope, with the company apparently in talks with Apple to build OLED displays for the iPhone in 2018. It has other ventures with car manufacturers to build batteries for electric vehicles, which could take off in the next few years.

However, there is a sense that Samsung’s core businesses are becoming less valuable, due to the increased competition and lowering of prices. MediaTek appears to be beating Samsung in chip sales across China, while Xiaomi and Huawei continue to creep up to Samsung’s sales record in Asia.

Still, even with the scare in sales, Samsung is expected to report $5.7 billion in profit during the fourth quarter. It is not as high as some expectations, but compared to the rest of the mobile industry (apart from Apple), it is one of the few numbers out of the red.

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