Samsung Electronics Co Ltd (OTC:SSNLF) is the world’s leading manufacturer of cellular devices, but this year, the company’s stock has been one of the worst performing tech stocks on the market.
Billions have been wiped off the South Korean giant’s value over the last few months, as Samsung has received increased competition from its smartphone competitors. The manufacturer has also suffered from the worries about the health of the semiconductor market.
Samsung Stock Suffers
According to CNBC, Samsung is down over 11 percent this year – more than any other major Asian or US tech stock. Nearly $40 billion has been wiped from the company’s market cap year-to-date.
Last year, Samsung saw quite a rally, and the company saw a 41% increase in 2017.
What Gives?
Samsung’s Q2 2018 earnings showed the slowest profit growth in nearly a year, but still remains the top cell phone manufacturer in the world marginally. Global smartphone shipment was also on the decline as it dipped 1.8% year-on-year in Q2.
Rising competition in the industry is partially to blame for the halt in growth, and the company has a plan. Samsung is hoping that it’s recently released Note 9 smartphone will help revive the company’s sales as it’s S9 didn’t do as well as hoped.
“The premium S9 did not work well in those markets. So now the only market they can sell premium S9 in quantity is Korea, which is a very small market. The bulk of the issue is compounded because of softer premiums. If your halo device isn’t doing well it boils down to cheaper devices as well, because you lose the halo effect from the flagship,” Neil Shah, research director of Counterpoint Research, told CNBC Monday.
For the first time last quarter, Huawei became the second-largest smartphone manufacturer passing Apple and is on the prowl for Samsung’s top spot. Samsung is suffering the crucial markets of China and India – as Huawei is the biggest player in China.
In India, a smaller South Korean competitor, Xiaomi, is coming out of the woodworks and is giving Samsung a run for its money in the country.
Semiconductor Issues
In the past, the semiconductor part of Samsung has brought in serious profits for the company. Semiconductors only accounted for 37% of its total sales but brought in 78% profits in Q2 2018.
Samsung’s success in semiconductors offset its slow cellular device sales, but recently Morgan Stanley warned that there could be a rise in inventory in the Semiconductor industry. However, Samsung doesn’t seem to be concerned just yet and in its official Q2 earnings report states that it expects its memory chips to remain “solid” in Q3 and Q4 of 2018.
Featured Image: Depositphotos/© TKKurikawa
