The Wages of Competition

Samsung Electronics Co’s  weaker-than-expected second-quarter earnings guidance and tepid results from HTC Corp show that high-end smartphone makers are starting to see growth taper as competition bites and cheaper devices flood the market.


High smartphone penetration rates in developed markets such as North America and Western Europe are leading to slower growth for high-end models…. Though premium models are most profitable for mobile-phone makers in general, they may have to look to cheaper models for growth, targeting emerging markets where growth potentials remain high….


Apple is widely expected to launch a lower-cost version of its iPhone later this year….  While Samsung and HTC have long made midrange phones, both are expected to bend their premium line down to more price-conscious customers.

In a free market, a monopoly’s barriers to entry always will be overcome by entrepreneurs, the monopoly’s pricing power will be broken, and the monopoly will lose market share to newer, better, cheaper rivals.

In a free market, a product leader’s high prices always will be driven lower through the competitive pressure of new entrants into the leader’s product niche.

You don’t get this competition in a managed economy, whether an openly socialist one, or the social democratic ones of Europe.  Or the regulation-controlled economy that the United States’ one is becoming.

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