Samsung touts S5 sales success but device hit by “astronomical” BOM

Samsung touts S5 sales success but device hit by “astronomical” BOM

16 APR 2014

Samsung claims its new flagship Galaxy S5 smartphone is selling faster than its predecessor, a crucial development for the South Korean vendor in light of new research that shows the device is likely to generate lower margins for the company compared to other high-end devices on the market.

“(The S5) is selling faster than the S4 so far, though it’s difficult to share specific numbers as we’re still at early stages,” Yoon Han-kil, senior vice president of Samsung’s product strategy team, told Reuters in an interview.

“S5 sales should be much better than the S4.”

Samsung did not offer any sales target for the S5, but Yoon said the flagship device should do significantly better than the 10 million S4s sold in the first month of that phone’s launch.

The world’s biggest smartphone maker has slashed prices of the S5, which rolled out globally on Friday, and more than doubled the number of initial launching countries to 125 in a bid to sustain growth in the mobile business, which generates 70 per cent of its total profit.

A smooth launch is crucial for Samsung, which reported its second straight quarter of profit decline earlier this month as margins in the key smartphone business come under growing pressure from cheaper Chinese rivals.

And margins are set to be hit on the S5 too. A new report from IHS Technology claims the S5 has an “astronomical bill of materials (BOM)” of $256.52 (including manufacturing cost), more expensive than the 32GB iPhone 5S ($207 BOM) and Galaxy S4 ($244 BOM). The teardown assessment does not include other expenses such as software, licensing, royalties or additional expenditures.

Yoon’s confidence on sales is backed up by early feedback from retailers. UK retailer Phones 4U today announced that sales of the S5 on the first day alone were double that of the S4 during the same period.

At its unveiling at Mobile World Congress in February, the South Korean company highlighted a focus on customer needs rather than technology innovation for its own sake, arguing that users prefer “durable design, a simple and yet powerful camera, faster and seamless connectivity, and a phone that can help them stay fit”.

While the Galaxy S5 launch comes mid-way between releases of Apple’s flagship iPhone, Samsung will not be without challengers in the premium devices space. HTC recently announced its One (M8), the successor to its well-regarded One, and Sony’s Z2 is similarly well-specified.

And competition is similarly fierce in the mid-tier, where vendors such as Huawei, ZTE, Lenovo and Nokia join the list of rivals.

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Justin Springham

Justin manages the editorial content for the Mobile World Live portal and award-winning Mobile World Live TV service. In the last few years Justin has launched and grown a portfolio of premier media products, which include the Mobile World Congress...

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