Samsung Falls Short of Estimates, Chinese Phones Gain in Emerging Markets

Second-quarter profits for Samsung Electronics fell short of analysts’ estimates marking a fifth straight quarterly decline.

According to Market research firm IDC, Samsung remains the world’s largest maker of smartphones, but was the only vendor amongst the top five that lost market share this quarter –falling to 22 percent, from 25 percent a year earlier.

One reason for the decline is Samsung misreading the market for high-end devices and failing to manufacture enough curved screens for the company’s popular Edge version of its flagship S6 smartphone.


 

The company also continued to lose ground to Chinese smartphones in emerging markets while its traditional phone offerings had trouble competing with Apple’s iPhone 6.

Samsung remains the world’s largest smartphone maker, but was the only vendor amongst the top 5 to lose market share in the second quarter. 

Net income, excluding minority interests, dropped to 5.63 trillion won ($4.9 billion) and operating profit fell to 2.76 trillion won from 4.42 trillion won one year earlier. The company did however announce that it doubled its interim dividend.

Thursday morning trading in Seoul saw shares of Samsung fall 1.6 percent to 1,243,000 won. Overall, the stock has lost 6.3 percent this year, while the Kospi index as seen a 6.6 percent gain.


 

Lower Prices and More Offerings on the Way

To address the decline, Samsung announced that it will add more middle- and low-end smartphone models, change pricing on the S6 and cut spending in the phone division.

“Sales momentum for high-end products will be maintained by adjusting the price of the Galaxy S6 and S6 Edge and introducing new premium smartphone models,” the company said in an e-mailed statement.

Chinese Challenge

The company’s share of the market in China slid to 8.6 percent in the second quarter –down from 9.8 percent in the first quarter, according to industry analyst IHS.

Chinese-based Xiaomi holds 18.2 percent of the Chinese market, followed by Huawei Technologies Co’s 16.2 percent and Apple’s 11.6 percent.

A stronger won also hurt Samsung, making its products more expensive in some markets as the South Korean currency advanced about 10 percent against the euro in the past 12 months.

Chip Profits Rise

Profit at Samsung’s semiconductor business, rose to 3.4 trillion won, compared to 1.86 trillion won last year.

This in large part to the company buying processors and chips from itself after switching from its smartphone chips previous manufacturer, Qualcomm Inc .

Reports are that Samsung has been tapped to produce chips for the next version of the iPhone as well.

 

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