One may think that the launch of a new flagship smartphone would catapult any company’s stock. Unfortunately, despite the Galaxy Note 9 launching to initially positive early hands-on reviews, Samsung’s performance as a whole isn’t following the same success.
In fact, according to PatentlyApple, Samsung is one of the world’s worst-performing technology stocks this year. The company has seen billions wiped off its market value as investors concerns continue to grow around increased smartphone competition as well as worries about the health of the semiconductor market.
Falling Samsung shares
CNBC reports today that “Shares of the South Korean giant are down over 11 percent this year, more than the major U.S. and other Asian technology stocks. Over $39.4 billion has been erased from Samsung’s market capitalization year-to-date. It’s a far cry from the 41 percent rally Samsung shares saw in 2017.
If it wasn’t for their success in semiconductors, the company could have collapsed. The semiconductor division has been Samsung’s biggest business, accounting for 37 percent of sales but 78 percent of profits in the second quarter of this year. Samsung’s success in semiconductors has helped it offset a slower smartphone market, but some analysts fear that the market dynamics that helped it charge high prices could become undone this year. In a recent note, Morgan Stanley warned of rising inventory in the semiconductor industry, which could make it harder to charge higher prices.
Samsung’s second-quarter earnings showed the slowest quarterly profit growth in more than a year, partly because of sluggish smartphone sales. Revenue from the mobile division was down 22 percent year-on-year in the three months to June, which Samsung attributed to “lower-than-expected sales of the Galaxy S9,” the company’s flagship smartphone. Samsung is hoping the recently-released $1,000 Note 9 smartphone could help revive sales.”
Samsung expanding its horizons
Despite its declining balance sheet, Samsung’s mobile President of their Mobile Communications Division Koh Dong-Jin (better known as DJ Koh), said that Samsung is quick to respond to changing market trends and it is this fact that will keep the company at the forefront. Koh stated that “Samsung will solidify its leadership in the global smartphone market as we have competitiveness in terms of responding quickly to market changes. With more competitive budget smartphones in the lineup, Samsung will expand our business in emerging markets, and we will also do everything possible to ensure future growth by investing more in future technologies such as Bixby, SmartThings and the 5G network.”
Koh also added that he recognizes the company’s struggle in China and through a combination of restructuring and opening a new store, he is confident that Samsung can recover its market share next year. Koh further noted that “For the past six to seven years, I have used 70 percent of my energy on premium smartphones, but the high-end phones have less importance in emerging markets such as India, South America, and Southeast Asia. Samsung’s upcoming mid-range smartphones will solidify our lead in emerging markets, featuring more innovative technologies.”
Samsung’s foldable smartphone
It appears that Samsung’s focus to bring it back to the forefront of the market is placed firmly on the launch of a foldable smartphone. “Once we launch the foldable phone, I would like to have a great response (from the industry and consumers),” Koh said. “It is not far away. We will have an event solely for the foldable phone.”
So it appears that Samsung isn’t counting on the Note 9 to recover its market position, or for that matter cracking China. The company believes that its work on a foldable device will be the feature that catapults the company back to success and eliminate investor concern that its flagship smartphones are inferior to the competition.