Samsung Electronics’ mobile phone division has proved to be the company’s bread and butter over the last few years, helping to offset the adverse business environment that some of its other business had been facing. According to our estimates, the mobile division accounts for about 40% of its value. The division’s sales have remained upbeat, with shipments rising by around 22% year-over-year to around 85 million units during Q1 2014. The initial uptake of the company’s new flagship handset, the Galaxy S5, has also been encouraging, with around 11 million units shipped during the first month of sales, beating the initial sales of its predecessor.
Some of the factors behind Samsung’s success in the crowded Android smartphone space include its broad portfolio of products at multiple price points, its early entry into the large-screen smartphone or “phablet” category and its formidable marketing capabilities. However, despite the strong recent performance, there have been signs that the division could face some headwinds going forward due to the increasing competition from Chinese and other local players in the lower and mid-range segments as well as Apple, which has been pushing into new markets. In this note, we take a look at some of the potential threats that Samsung faces in the smartphone space.