Samsung's smartphone struggle may only get worse

Credit rating agency Fitch predicts Samsung's share of the global smartphone market will fall to 25 percent next year.

Don Reisinger
CNET contributor Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
Don Reisinger
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Samsung can't get away from a rash of bad news lately.

Fitch Ratings, a major credit rating agency in the US, shared negative sentiment Tuesday on Samsung's chances in the smartphone market over the next year. Nitin Soni, director of corporate rating at Fitch, predicted that Samsung's worldwide smartphone market share will fall from 31 percent this year to 25 percent in 2015, reported The Wall Street Journal.

The bad news continued today as Bernstein Research analyst Mark Newman said in a note that Samsung could be in for real trouble in the smartphone market if not for "a drastic change in smartphone strategy," according to the Journal. Newman slashed his price target and said investors should "react now before it's too late."

The Korean electronics giant, which attempts to sell a phone to everyone regardless of budget or geography, is facing increased price competition. Formerly the top mobile device maker in China and India, Samsung lost its footing in both crucial markets in the second quarter. China has been especially troubling for Samsung. Research firm Canalys said Samsung slid to second place in the Chinese smartphone market for the first time since the fourth quarter of 2011, ceding the top spot to Chinese vendor Xiaomi.

In July, Samsung reported troubling second-quarter earnings as its operating profits fell 25 percent, marking it's third straight quarter of profit declines. Samsung also cautioned that its smartphone division will continue to face "a challenge" as it takes on an increasing number of mobile companies and invests heavily in marketing in order to keep its share afloat.

"Prospects for growth remain unclear as competition over global market share intensifies in the mobile industry," the company said last month. "Samsung expects to see its sales of mobile devices increase with the rollout of flagship products and new models, but profitability may suffer due to a heated race over price and product specifications."

It's not all bad news though. Samsung was the top smartphone maker in the US in the second quarter, due in large part to the success of its marketing and its flagship Galaxy S5. Some cynics, however, said Samsung's success was due to pent up demand for Apple's anticipated new iPhone, with Apple customers waiting to see what the company has in store instead of buying an iPhone 5S or iPhone 5C.

CNET has contacted Samsung for comment on the Fitch rating and analyst comment. We will update this story when we have more information.