Samsung considers reducing smartphone models next year

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Samsung’s head of investor relations, Robert Yi, said during a New York presentation that the company plans to cut the number of smartphone models it produces next year by about 25 to 30 per cent.

The move came as the South Korean firm seeks to reduce costs in order to better compete with Chinese brands that offer cheaper models.

Samsung’s flagship Galaxy S smartphone suffered in the high-end market with the release of the new iPhone 6, while its dominance in the mid- and low-end segments were challenged by makers such as Xiaomi, Lenovo and Huawei.

In October, Samsung saw its third-quarter income in its mobile division plunge 74 per cent from the previous year, while its operating profit dropped to its lowest level since the middle of 2011.

The company’s margins from its mobile and information technology business also fell to just seven per cent in the third quarter from 15 per cent in previous years.

Acknowledging the drop in margins, a company executive said during an earnings call in October that Samsung’s new goal is to keep a double-digit percentage margin starting next year.

Samsung will “increase the number of components shared across mid- to low-end models, so that we can further leverage economies of scale.”

Analysts believe that having lower-end models will enable the company to better manage its supply chains and inventory.

Evercore ISI analyst Robert Cihra praised the move, noting that it was “about time” that Samsung slash the number of smartphone models it offers in order to reduce costs.

“It is likely to help Samsung reduce costs, which is imperative to stabilizing their margins,” he said.

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