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Samsung is the top smartphone vendor? Not so fast

Written by Rich Fiscus (Google+) @ 21 Oct 2011 1:14 User comments (8)

Samsung is the top smartphone vendor? Not so fast Since yesterday the web has been full of reports that Samsung may have become the top smartphone manufacturer in the world. Before you buy into the hype, there are a few things you should consider.
Without a doubt, Samsung is the fastest rising star in the smartphone market. Their Galaxy S II Android phone has generated more buzz than any non-iPhone handset in recent years.

Now The Wall Street Journal is reporting Samsung shipped 20 million smartphones in Q3, beating both Apple and Nokia. That's impressive to be sure, but does it really make them the market leader?

The most obvious problem with that assumption is that shipments aren't sales. Based on Apple's recent financial report, we know they sold just over 17 million iPhones in the same period.

If Samsung had actually sold more smartphones than Apple in the third quarter, it seems likely they would have said so. Since they haven't made such a statement, it's probably safe to conclude that's not the case.

In addition, there's the issue of timing. We are talking about a period of time when Samsung had just introduced the Galaxy S II in several countries, and was in the process of launching it in the US. The iPhone 4S launch was still on the horizon.

And let's not forget, Apple is known for selling new iPhones so soon after manufacture that the glue on the screens hasn't finished drying.

That means Samsung was ramping up shipments of a popular new phone while Apple was winding down sales of an old model.

Hype and speculation aside, none of this takes away from what Samsung has accomplished in the smartphone market. They have leapfrogged more established vendors like HTC and Motorola to become the biggest star in the Android world.

But they haven't dethroned Apple - not yet at least.

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8 user comments

121.10.2011 8:55

Nice article, well written here. I was thinking the same when reading those articles from National Post and what not. It's also why i never bothered to report as news to here.

221.10.2011 11:40

This par for course for the Applettes. Those are not sales?? Until they can prove they are not sales--they are sales!! Go Samsung Go!!!

321.10.2011 15:01

Quote:
The most obvious problem with that assumption is that shipments aren't sales.
That depends on how they recognize revenue. I think what you mean is those are not retail sales. But that doesn't matter because Samsung is not a retailer. Retailers are purchasing phones from them so on Samsung's ledgers they record these shipments as sales as soon as legal custody of the product transfers.

The only time a manufacturer will not record a sale upon shipment (or receipt of) is if there is a high likelihood of return based on IFRS guidelines. For example most semi-conductor manufacturer's will not record sales until it has sold at retail or in a more conservative scenario when a warranty expires.

I don't know exactly what Samsung's revenue recognition method is (it's probably in the disclosure section of their most recent public financial statements), but it could very well be that they record sales on shipment. Out of the box warranties tend to be very limited and most cellular companies have their customer base by the balls.

I do agree with the rest of your argument though. I just wanted to clear up that first part.

421.10.2011 15:23

So I was curious and looked it up...

Quote:
2.19 Revenue recognition

(a) Sales of goods
Sales of products and merchandise are recognized upon delivery when the significant risks and rewards of ownership of goods have transferred to the buyer, continuing managerial involvement usually associated with ownership and effective control have ceased, the amount of revenue can be measured reliably, it is
probable that the economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. The Company records reductions to revenue for special pricing arrangements, price protection and other volume based discounts. If product sales are subject to customer acceptance, revenue is not recognized until customer acceptance occurs.
The problem is it doesn't tell you exactly what products are subject to customer acceptance since they manufacture a wide variety of things.
This message has been edited since its posting. Latest edit was made on 21 Oct 2011 @ 15:39

522.10.2011 5:01

Regardless, Samsung will be making the next iPhone, so they will be the biggest smartphone maker then.



622.10.2011 11:20

What a load of ......

All of your rubbish about who had released what and when is completely irrelevant. So Samsung sold/shipped X phones in Q3. Did Apple sell X phones in Q3 for sure? iPhone4S wasn't out yet? So what. Apple had sold/shipped other models before the 4S and Samsung had sold/shipped models other than the S2 before as well. Wouldn't the top seller be the one who had sold more phones than another, not just during a single period?

722.10.2011 12:21

It all depends when they consider a sale to occur. Businesses record revenue on delivery. Retailers usually buy their (manufacturer here being samsung) products on bulk and resell them to customers. The transfer of ownership transfer from samsung--> retailer, thats when samsung gets revenue. Then the phone goes retailer--> customer, thats the retailer's revenue. So technically speaking Samsung sold more phones (to retailers). Its important of them to keep track of retail sales though, as lack of sales may be due to returns by retailers or customers, ultimately sending the product back to the manufacturer (then Net Sales decline).

So Azuran the customer is actually the retailer. Samsung is the manufacturer.


822.10.2011 13:59

Originally posted by jrp696:
It all depends when they consider a sale to occur. Businesses record revenue on delivery. Retailers usually buy their (manufacturer here being samsung) products on bulk and resell them to customers. The transfer of ownership transfer from samsung--> retailer, thats when samsung gets revenue. Then the phone goes retailer--> customer, thats the retailer's revenue. So technically speaking Samsung sold more phones (to retailers). Its important of them to keep track of retail sales though, as lack of sales may be due to returns by retailers or customers, ultimately sending the product back to the manufacturer (then Net Sales decline).

So Azuran the customer is actually the retailer. Samsung is the manufacturer.


I understand that, but in this case I think the bold applies to final customers. IAS No. 18 states that revenue should not be recognized if the likelihood of return exists (whether by retailer or final customer). In this case Samsung would wait until either sale to the final customer or warranty expiration. Or they could completely ignore all of this and determine that returns are immaterial or simply use an Allowance for Sales Returns account. Since neither one of us is a member of Samsung upper management we will never know. The point of my statement was what Rich's interpretation of what a sale is was incomplete/flawed.

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