You knew this had to happen. While Samsung and other Android smartphone vendors bask in the glory of marketshare vs. Apple’s iPhone and iPad, it’s Apple that walks away with most of the profits. Without profits, tech companies have to tighten their belts, cut back on R&D (research and development), close stores, and reduce the product line.
Guess which high profile tech company is doing all that?
If you guessed Apple, you’d be so far off the mark that you’re probably in need of public assistance for watching too much Faux News and reading Business Insider. It’s not Apple. It’s Samsung.
The Korean giant’s profits have been on the wane for a year, matched in dropping velocity only by the mostly flatlined stock price. Samsung has cut back on the number of smartphone and tablet models, reduced spending, laid off employees, and now it’s in the process of shuttering a flagship store.
The Samsung Experience Store in London, once a flagship operation, is now a shuttered failure. Why? Budget cuts. The Galaxy maker just doesn’t have the money to keep losing propositions afloat. Why? Because Apple, for the past five years, has sucked out most of the profits in the smartphone, tablet, and PC industry.
Samsung recently stopped selling notebooks in Europe and plans to roll out new retail stores across the continent have been mostly shelved.
What’s going on?
This is what happens when the money well runs dry. Apple has taken so much profit from the industries where it competes that competitors are having a rough time just breaking even, let alone coming up with additional profits or investment money to push into new products.
Here’s the thing to understand about the smartphone and tablet market. Samsung, for the most part, is the only player other than Apple to make substantial profits, and those profits are dropping faster than a Super Bowl wardrobe malfunction. What does that say about the rest of the industry?
Even Chinese smartphone darling Xiaomi, which took in another $1-billion investment (about what Apple takes in as profit every couple of weeks) hasn’t been able to expand beyond China and India (and was recently banned in India) because intellectual property laws are tougher in other countries, and the MiPhone and MiPad maker is long on copying, short on originality, and shorter on the money it needs to compete with the likes of Apple.
What happens when the money runs out? Samsung’s recent cutbacks give us an idea of what’s to come.