This Is Bad News For Samsung, But It's Not A Death Sentence

After claiming nearly a third of the world's smartphone sales in 2013, Samsung now commands less than 25 percent of the global market, and the numbers out of China are even worse:

Chinese smartphone sales from IDC

It's bad news for the Korean smartphone maker, but it's not a death sentence. Samsung still owns the second most profitable mobile business in the world (behind Apple), and they still ship the most units annually. They may have problems, but for now, they have the money and infrastructure to do something about it.

But they do have to make a choice. For the last five years, Samsung has taken an all-of-the-above approach, releasing a parade of budget handsets, mid-shelf bargains, and premium smartphones, a something-for-everyone philosophy that helps explain their massive shipment numbers.

Note Samsung's sizable lead in number of smartphone models since 2010 below, 44 percent more than second-place HTC:

While Samsung's sheer volume is impressive, the numbers betray a lack of focus. Apple Inc. AAPLhas stuck stubbornly to the high end; upstart Xiaomi has committed to budget devices. Samsung is trying to do everything, but failing to do any one thing best.

If Samsung wants to stop their slide, the company must choose: budget or premium? Are they the Apple alternative…or the cheap, more reliable Xiaomi?

Let's look through both doors to see which might be a better fit for Samsung's future.

The case: It's the latest trend in international smartphone sales
The catch: Is it in Samsung's DNA?

With the recent release of the Z1, Samsung seems to be taking the budget market seriously. The new handset is just $95 unlocked, and it represents a clear shot at (under?) Xiaomi, whose budget phones rarely dip below $150.

Here, however, Samsung might already be going too cheap. Consider that Xiaomi's budget devices still feature decent features and respectable performance. The Z1's spec sheet, meanwhile, reads like it's from 2010, with a paltry eight hours of battery life, a 3.15 megapixel camera, and a low-res, 233-pixel per inch display. Sure, it's a budget phone, but next to Xiaomi's offerings, the Z1 is garbage. Early consumer response to the device only underscores the problem.

In order to play the budget game, Samsung needs to deliver decent specs at even lower prices, which at this point might just be impossible without radical changes to the organization. Xiaomi maintains its bargain prices through a combination of low margins, limited marketing, and strategic product runs, none of which match Samsung's standard business practices.

To date, Samsung has built its business on headline-grabbing spec sheets and billion-dollar ad campaigns. The budget market just doesn't match their identity.

The case: Builds on a good brand
The catch: Will Samsung commit?

Particularly in the United States, Samsung has built a brand on quality. From the company's Galaxy S line to the Galaxy Notes, Samsung has a solid stable of expensive, popular phones with sparkling spec sheets. Surely Samsung could invest heavily in its premium lines, while slowing production on their dozens of nameless budget devices.

The problem is that Samsung has a habit of cutting little corners—not obviously enough to tarnish the brand, but enough to hinder the overall experience. Take hardware design. For years, Samsung has continued to produce top-shelf phones with budget components: the Galaxy S line's plastic back being the most infamous example. These inexpensive materials have allowed Samsung to maximize profit, but next to an iPhone or HTC One, the Galaxy S phones have simply felt cheap.

Samsung's software has also been inconsistent. Do they embrace Android entirely, try to build on top of it with TouchWiz, or use a different platform altogether, like Tizen? In theory, the front-end TouchWiz gives Samsung more control—control they can use to craft a premium user experience to stand out from their Android rivals. But in practice? They've only made the core Android experience worse, with TouchWiz more a distracting layer than intuitive addition. And so far, Samsung's Tizen experiments have flopped.

Still, rumors suggest the Galaxy S6 will feature a new, premium metal body and a stripped down TouchWiz interface, with the core Android OS featuring more prominently. What's more, the Galaxy Note line remains the class of the big-screen industry. For Samsung, the premium pieces are already in place, but the old corner-cutting habits linger. The upcoming launch of the Galaxy S6—and its subsequent sales—will tell us whether Samsung is truly committed to going premium.

Regardless of what Samsung chooses, they'd better move quickly. Otherwise, they just might find themselves squeezed to death in the middle.

The post Samsung's Mobile Future: Budget or Premium? appeared first on FindTheBest: The Official Blog.

Image credit: Honou, Flickr