People are holding on to their phones for longer. That’s a big headache for Samsung Electronics , the world’s largest smartphone maker by volume.
The global smartphone market is on track for its second annual decline in a row—shipments fell nearly 4% in the first three quarters this year, according to International Data Corp. Manufacturers have been launching plenty of new models, with faster processors, sharper screens and better cameras. Yet such improvements haven’t persuaded enough consumers to ditch their old phones.
Sector leader Apple has managed to boost revenue despite stagnant unit sales in the past couple of years by raising prices. Other smartphone makers—lacking the walled garden of Apple’s iOS operating system—have found that trick harder to pull off. Consumers find it easier to switch brands when they almost all use Google’s Android operating system.
This is exactly the predicament in which Samsung finds itself. The Korean technology giant shipped 72 million smartphones last quarter, 13% fewer than a year ago, according to Counterpoint Research. The largest Chinese phone makers, Huawei, Xiaomi, Oppo and Vivo, have swallowed much of its market share: they shipped a combined 152 million smartphones last quarter, 18% more than last year and twice as many as Samsung.
By selling smartphones with premium features at affordable prices, these Chinese brands have been growing at breakneck speed in emerging markets in places such as India and Indonesia, where Samsung has traditionally been the market leader. Though they make less money per phone than Samsung, which used to dominate the profit pool for Android phones, their rising sales volume means the four largest Chinese brands combined earn more money from selling phones than the Korean giant.
The question for smartphone makers other than Apple is: What will get consumers, especially those in developed markets, to pay up for new models? Samsung thinks the answer lies in phones with screens that can fold up like books. The appeal is clear: people want bigger screens but also want their phones to fit into their pockets. For Samsung, there could be an added benefit if foldable phones catch on: it is also the largest maker of the type of screen used in such smartphones, called organic light-emitting diodes, The problem: these phones will be pricey. IHS Markit estimates they could cost about $2,000 each.
In the past two years, Samsung has been buoyed by strong demand for memory chips, which made up about three quarters of its operating profit last quarter. But as the chip boom fades, investors may begin to pay more attention to its sluggish smartphone sales again.
Write to Jacky Wong at JACKY.WONG@wsj.com