At first glance, there may seem little to worry about, but the data, published Thursday, shows a 17 percent profit fall compared to the first three months of this year, and a 20 percent drop over the same period last year. The last time the Korean tech giant experienced a drop in net profit over a 12-month period was toward the end of 2011.
Dependent on mobile device sales for much of its overall business, Samsung executives will be concerned to learn that operating profit in this particular division fell by 31 percent in Q2 compared with the previous quarter.
Increasing competition, strengthening currency
Competition in the smartphone market is tougher than ever, with more and more companies gaining ground with low-cost handsets, adding pressure to Samsung’s ability to increase shipments.
IDC data released just this week indicates how two Chinese firms, Huawei and Lenovo, are steadily increasing their shares of the global smartphone market, knocking not only Samsung’s business, but Apple’s, too.
With around 90 percent of Samsung’s sales coming from outside Korea, profits were also hit by a strengthening Korean currency, the tech giant said in a statement.
The company offered a cautious outlook, saying growth prospects “remain unclear as competition over global market share intensifies in the mobile industry.”
It added, “Samsung expects to see its sales of mobile devices increase with the rollout of flagship products and new models, but profitability may suffer due to a heated race over price and product specifications.”
Those new models are set to include two high-end smartphones, with launches expected in the next six months. In an earnings call Thursday, Kim Hyun-joon, a senior VP of Samsung’s mobile communications division, said one of the devices will have a large screen – possibly the next iteration of the Galaxy Note – adding that the other would be constructed with “new materials”. No other details were offered by the executive.
The launch of its flagship Galaxy S5 handset at the start of Q2 evidently failed to generate bumper profits for the company, and with Apple expected to unveil its first large-screen handset in the fall, the pressure on Samsung to strengthen its mobile business will be greater than ever.