Samsung Electronics is in dire need of crisis management, analysts say, as ineffective product differentiation sparks margin erosion and a decline in market share.
Until recently the world's largest smartphone marker was considered an unstoppable force. However, with key rival Apple getting its groove back and intensifying competition from low-end handset manufactures in emerging markets, things don't look so rosy anymore.
Shares of Samsung are down 10 percent year to date, far under-performing Apple shares, which are up 28 percent.
"Samsung is currently in crisis mode," CW Chung and Taeyoung Kim, analysts at Nomura wrote in a note titled 'Crisis management ability much needed' in which they downgraded their price target on the stock to 1.55 million won from 1.8 million won. Samsung shares last traded at to 1.23 million won ($1,210).
Profitability is deteriorating more steeply than expected, Chung and Kimg said, warning Samsung is unlikely to meet third quarter guidance for a 10 percent on-quarter rise in smartphone shipments and 10 percent decline in average selling price (ASP).
Mobile carriers appear reluctant to bear the inventory burden that resulted from Samsung's unsuccessful product differentiation, especially ahead of Apple's iPhone 6 launch expected in September, according to Chung and Kim.
"Hence, there could be some potential downside in terms of ASP and shipments for high-end," they said.
Furthermore, intensifying competition from Chinese players will present a major headwind to the company's mid-to-low end smartphone business.