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Samsung profit slides for fifth straight quarter

Samsung Electronics has reported yet another substantial drop in its quarterly profits, as its smartphone unit failed to reverse its declining stronghold in the industry. Samsung’s profit continues to slide after the company has seen its net profit for the second quarter of the year drop by 8 percent from the previous year, while its operating profit slid 4 percent. The results marks its fifth straight quarterly profit decline in a row after its flagship Galaxy S6 and S6 Edge failed to live up to company’s expectations following a fierce competition from its low-cost Chinese rivals and Apple’s iPhone. Samsung has been struggling for quite some time now to compete with Apple in recent quarters with Chinese rival Xiaomi constantly pushing Samsung’s market share and profit margins off the way.

Samsung’s net profit for the three months ended June 30 dropped to 5.75 trillion won ($4.9 billion), an 8 percent decline from the 6.25 trillion won ($5.4 billion) it posted last year. The company’s mobile unit took the hard hit. The mobile division’s operating profit slid 37.6 percent to 2.76 trillion won ($2.4 billion) in the second quarter, from 4.42 trillion won ($3.8 billion) a year earlier. The company’s operating profit margin in the last quarter was 10.6 percent, down sharply from 15.5 percent recorded in the second quarter last year. However, Samsung’s semiconductor division helped narrow the profit decline with an operating profit of 3.40 trillion won ($2.9 billion), up from 1.86 trillion won ($1.6 billion) the previous year. A significant part of these profits came from memory chips, where Samsung has long been on a forefront as the world’s No.1 manufacturer by sales.

Had it been for the company’s components division which includes memory chips, application processors and display panels, Samsung’s overall profit would have been much worse than expected. Once a leader in the smartphone industry, the South Korean electronics giant seems to be struggling under pressure from Apple dominating the segment and cheaper Chinese competitors looking to make their mark. Samsung’s mobile division has been facing a tough business environment, since it fell short of the shipments of curved screens used in the Galaxy S6 Edge handsets, and it failed to meet the consumers’ demands. The Galaxy S6 and S6 Edge smartphones, which were launched in April, were supposed to bring the company’s mobile business back on track. But the consumer interest in them fizzled out soon.

As it turned out, the phones haven’t been able to revitalize the company’s financial results. Instead, the company is cutting the price of its flagship devices to keep the sales up. It is still uncertain, whether the phones will ever come even near to what they’ve accomplished from the 2012’s blockbuster Galaxy S3, the same device that put Samsung at the top of the competition. And that’s the end of the story there. The Galaxy S3 was one of the biggest success stories that ever came out of Samsung, and probably that was the last. Samsung already lost its footing in both China and Indian markets, where once it used to rule the budget segment.

Above all, Samsung lost the Chinese territory for the first time since Q4 2011, to the Chinese vendor Xiaomi. Sometimes referred to as the “Apple of China,” Xiaomi has long been criticized for producing devices that bear remarkable similarities to Apple’s iPhone designs. In the high-end segment, Apple has become the bigger threat with its iPhone 6 and iPhone 6 plus phones killing the competition in the growing phablet segment. Now that Samsung is on the verge of losing its home turf to its biggest rival Apple, the company is hoping to bring in new large-screen and budget phones to see its phone sales increase in the coming quarter. Samsung will host an event next month in New York to show off its newest smartphones – likely a new Galaxy Note 5 and Galaxy S6 Edge Plus, and possibly a new smartwatch.

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