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Samsung warns of earnings decline, but cheaper smartphones should boost profits


Samsung warns of earnings decline, but cheaper smartphones should boost profits


Samsung is going through difficult times as it heads for its first annual earnings decline since 2011.

It has said profit between July and September will be the lowest in more than three years amid uncertain short-term prospects for smartphone sales.

However, its shares rose, reflecting expectations that profits will pick up with the launch of less expensive smartphone models in the months ahead.

The problem has been Apple’s iPhones taking sales in the premium segment while cheaper Chinese rivals undercut the South Koreans at the bottom end.

The numbers tell the story: in the April to June period Samsung’s market share fell from 32.3 percent last year to 25.2 percent this year.

Apple’s sales were stable, China’s Huawei nearly doubled its share and other Chinese manufacturers all enjoyed significant gains.

Samsung is particularly vulnerable to competition from the less expensive Chinese handsets as the mobile business accounted for more than two thirds of its operating profit last year.

Which is why it plans to launch more cost-competitive mid-to-low end devices and invest in its microchip business, as those semi-conductors power even the phones of some of its rivals.

Samsung this week revealed plans to spend the equivalent of 11.65 billion euros ($14.7 billion) on a new chip facility near Seoul – its biggest investment in a single plant.

with Reuters

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