If there's been a common knock against Samsung, it’s that the company cranks out way too many phones.
The worsening fortunes of its bottom line, which plummeted 50 percent in the last quarter, is forcing the company to retool its typical strategy. Instead of the more is more approach, Samsung wants to make less phones in 2015 to streamline its offerings and cut costs as rivals like Xiaomi and Apple nip at its heels.
The South Korean company will reduce the number of smartphone models it produces by around 25 to 30 percent, according to Robert Yi, head of investor relations for Samsung. He said during a presentation to investors in New York on Monday that Samsung needs to share its components across less low-end and mid-tier devices to save money.
The story behind the story: Samsung's new strategy is overdue. While its Galaxy Note 4 and Galaxy S5 are pretty solid devices, it has a confusing array of hundreds of different models. It can no longer create a phone for every niche, no matter how gimmicky, to satisfy the whims of customers. Its main competitors focus on a few, polished devices, and Samsung is wise to shift its strategy to focus on a handle of "hero" lines, while still leveraging its superior manufacturing capabilities.
Sticking with Android
Samsung is currently the world’s largest smartphone maker, but it’s losing ground fast. Its market share dropped to 23.8 percent in the third quarter, from 32.5 percent a year ago. Chinese competitor Xiaomi rose to third place behind second-ranked Apple, according to figures from IDC.
Market analysts say the strategy could help the company’s bottom line, at least in the short term.
“Even though smartphones’ average selling price will go down in the long term, we expect the company’s margins to improve as inventory management may get better,” said Lee Seung-woo, an analyst at IBK Securities in Seoul, via email.
Yewon Kang of IDG News Service contributed to this report