Samsung is losing profits due to the low popularity of its mobile processors

As Canalys statistics showed, in the global market for smartphones costing more than $600, Samsung still holds second place with 21%, but the leader is Apple with 63% of the market, and Huawei is at the bottom of the Korean manufacturer with its 8%. Both competitors now rely on their own software platforms and processors, and Samsung is heavily dependent on third-party ones, making it more difficult for it to survive.

Image Source: Samsung Electronics

This is the conclusion reached by sources interviewed by The Chosun Daily. Huawei’s Mate 70 series smartphones, unveiled at the end of November, are believed to use proprietary 6nm HiSilicon processors. The transition to the HarmonyOS Next operating system also marked Huawei’s distance from third-party software, which together allowed the price of new products to be lowered by more than 20% compared to their predecessors.

Apple, in turn, has refrained from significantly increasing prices for its products for three years in a row, although inflation has not gone away even in the United States. Samsung managed to maintain prices for the base Galaxy S24 models relative to its predecessors, but the company was forced to raise the price of the flagship Galaxy S24 Ultra model by 8.3%, since the components for this smartphone are expensive and are partly purchased externally.

Samsung’s own Exynos processors exist in nature, but rumors suggest that the company intends to equip the Galaxy S25 family, which debuts early next year, with Qualcomm processors. The supplier raises prices, this affects Samsung’s costs, but the company cannot proportionally raise the price of its smartphones due to competition, so the profit of the Korean company suffers. In the third quarter, Samsung’s mobile division increased revenue by 1.7% year-on-year, but operating profit fell by 14.5%.

In the second quarter of this year, according to Counterpoint Research, 85% of operating profits in the smartphone market went to Apple, while Samsung was content with only 12%. If in the first case the amount reached $1 billion, then in the second it was seven times less.

Switching to your own software platform not only reduces the burden on the company by not paying royalties, but also allows you to earn commissions for transactions in the branded ecosystem. Google and Apple are not shy about taking 30% of each payment. Samsung’s attempts to develop the Tizen OS operating system first limited its scope to smart devices, and then completely forced it to give way to Google Android. At the same time, it will be difficult to persuade users to switch to Samsung’s alternative to Android, as experts note. Huawei doesn’t have much to choose from in this regard due to US sanctions, and it has a large, loyal user base in China. Under such conditions, Samsung will have to focus on increasing the yield level of its chips in order to reduce costs by reducing its dependence on Qualcomm.