It's a familiar story among smartphone industry observers that Samsung has been facing some pretty serious difficulties in its mobile device division. Sales growth has slowed significantly, with Samsung even seeing year-over-year declines in recent quarters.
Margins in Samsung's mobile device division have crumbled, and it's clear that Samsung is scrambling to try to figure out how to fend off Android competitors like Xiaomi, which is willing to operate at thin margins, and Apple , which has ensnared the minds (and wallets) of premium smartphone buyers.
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In response to these difficulties, Samsung has been trying to roll out new, potentially more competitive, devices. To that end, Samsung just launched a smartphone known as the Galaxy A7 to round out its Galaxy A family of midrange phones. Unfortunately for the reasons I outline below, I believe that it won't be the success that some might be hoping for.
What is Samsung offering?The Galaxy A7 is the most "premium" model of a family of supposedly midrange smartphones. These feature all-metal bodies (addressing one of the big complaints that some have had about Samsung phones), feature Apple iPhone 5-like chamfered edges, and are quite thin (even thinner than the iPhone 6 at just 6.3 millimeters thin).
In the table below, I've listed an abbreviated set of specifications of the Galaxy A7, as reported by AnandTech:
This looks like a very solid midrange phone. The problem, though, is that while DailyTech reports that Samsung has yet to announce a price, the site does note that the lower-end Galaxy A3 and A5 phones are priced at $330 and $410. Given the improved specs on the A7, I wouldn't be surprised if the South Korean giant tried to sell it for $500 or more.
Metal's nice, but that's too high of a priceWhile Samsung probably thinks that a metal body will allow it to command a premium to other similarly spec'd phoned in the market, I have very serious doubt that this will be the case. In fact, speaking of specs, let's take a look at the specifications of the Xiaomi Mi4, the device that I believe (and that I'm sure others, too), believe to be the main competitor to the A7.
Now, while the Xiaomi Mi4 doesn't feature a metal body (it does have a metal frame), it has a lot going for it. Firstly, it's cheaper than what the A7 is likely to sell for at just $380 on the Xiaomishop.com website. It has a higher resolution display, more memory, higher resolution cameras, faster Wi-Fi connectivity and a faster processor.
The Mi4 is thicker than the A7 and has a smaller display, but I think from the perspective of "bang for the buck," the $380 Xiaomi Mi4 is the clear winner over what the Galaxy A7 is likely to be priced at.
And that's Samsung's problemAt the end of the day, Samsung's problem is that despite its vertical integration, it doesn't have much of a product moat. Who had heard of Xiaomi just a few years ago when they were shipping phones in volumes measured in the thousands? And in just a few short years, Xiaomi reportedly shipped over 60 million phones in 2014 and is aiming to double that in 2015.
Samsung can try its best to add value to its Android phones in order to fetch a premium and improve its margins. However, I think at the end of the day, I think it's going to be very difficult -- if not impossible -- for Samsung to return to its high-margin smartphone glory days, no matter what it does to try to differentiate its phones.
The article The Samsung Galaxy A7 Is Probably Going to Be a Flop originally appeared on Fool.com.
Ashraf Eassa owns shares of Qualcomm. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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