updated 07:17 am EDT, Fri June 7, 2013
$12 billion wiped off Samsung stock on reports of weakening demand
Despite debuting as the fastest selling smartphone in Samsung's history, fears that Galaxy S4 sales are slowing and that the company is trading profit margin for volume has led to $12 billion being wiped of its market cap. According to Reuters, the 6 percent share plunge follows the release of cheaper, lower spec Galaxy S4 variants including the Galaxy S4 Mini, which have much tighter profit margins. Further, analysts also believe that sales of the Galaxy S4 flagship are already starting to flatten out, while the mooted Apple iPhone trade-in scheme will put further downward pressure on Galaxy S4 sales.
"Sales of high-end handsets are lagging behind expectations, while low- to mid-end handsets are selling briskly worldwide," said Kim Young-chan, an analyst at Shinhan Investment Corp speaking to Reuters. "As the portion of low- to mid-range handsets is expected to increase in Samsung's overall mobile phone business, this has also sparked concerns about thinning margins and lower growth."
Analysts at JPMorgan believe that orders for the Galaxy S4 flagship have been slashed dramatically by between 20-30 percent. This is the direct result of weaker than expected demand from European and South Korean customers. Similarly, the drop in demand for Samsung's high-end smartphones, as well as those from other vendors has battered the stock of components suppliers. Conversely, data from ComScore shows that Apple continues to hold a significant lead over Samsung in smartphone market share.