Despite Samsung’s record profits, its smartphone business is still in trouble

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The Samsung corporation has nicely weathered a rough year caused by its mobile division, thanks largely to the strength of its other electronics business. Those other products helped the South Korean tech giant post record profits for the second quarter.

But regarding its smartphone business, trouble is still brewing.

As Reuters noted today, profits in Samsung’s mobile division fell 4.7 percent during the period. While the company says the Galaxy S8 and S8+ smartphones released in April are out-performing the Galaxy S7 and S7+, it is projecting a further drop in mobile earnings as most customers opt for its cheaper, older phones in the coming months.

Samsung got more troubling news this week from the latest China market share numbers reported by Canalys. As recently as 2014, Samsung sold the most smartphones in China. However, it has now fallen out of the top five, and Samsung saw sales decline in the second quarter, according to Canalys. The market is consolidating around the top five vendors in China, and Samsung is fading.

Meanwhile, its market leadership in India is under siege. Canalys reported that for the moment, Samsung still commands 25 percent of the Indian market, where it slightly increased the number of phones it sold there in the second quarter.

The problem is that the next three brands are Chinese — Xiaomi, Vivo, Oppo — and they all at least doubled the number of phones they sold in India during the same period. In fact, Xiaomi actually quadrupled its sales during the second quarter in India, according to Canalys.

“Samsung is under immense pressure in the mid-tier from the Chinese players,” said Canalys research analyst Ishan Dutt, in a statement, “It needs to use its brand to make its mid-tier devices more desirable. The recently launched S8 and S8+ have helped it win back some of its premium share. It now needs to generate a halo effect around these products in the mid-tier to counteract the threat from China.”

Next month, Samsung will unveil its new Galaxy Note8 which is expected to go on sale in September. This will mark the anniversary of the Galaxy Note7, which turned into a nightmare for Samsung after several units exploded and the company stumbled through attempts to fix and recall the devices.

Samsung’s mobile phone business was slumping before that wave of negative publicity. But the Note7 certainly didn’t help. And it also won’t likely help when Apple unveils its new iPhone in September.

This all raises the surprising question of whether Samsung, a company that has led worldwide sales of smartphones for most of the past several years, can regain its footing.

If not, it could be one day remembered as the Nokia or BlackBerry of the smartphone era.

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