Samsung profit squeezed by Chinese phone vendors and Apple

Samsung Electronics today said its net income dropped 49 percent to 4.14 trillion won or $4 billion in the three months ended September due to poor performance of its smartphone business.

IT market research agency IDC today said Samsung share slumped to 23.8 percent in Q3 2014 from 32.5 percent in Q3 2013. One of the main gainers was to Xiaomi that moved to third position based on shipments, ahead of LG and Lenovo.

Analyst firm Juniper Research estimates that the number of smartphone shipments reached 316.6 million in Q3 2014, representing 13.1 percent y-o-y growth and 5.5 percent q-o-q growth.

The biggest winners during the third quarter are those capitalizing on expanding Asian markets, such as Chinese phone maker Xiaomi. The firm sold 19m devices in Q3, a 25.8 percent increase in sales on last quarter, said Juniper Research.

Samsung lost its top spot in China smartphone sales to Xiaomi.

A Bloomberg report today said Samsung posted the smallest quarterly earnings in more than two years as profit margins are squeezed by competition from Apple’s new iPhones and cheaper Chinese devices.

The Suwon, South Korea-based company faces the strongest challenge yet to its reign as the world’s biggest smartphone maker with the iPhone 6 models winning customers in the large-screen market and Xiaomi Lenovo attracting budget buyers in China.

Samsung models
Operating profit for the quarter was 4.06 trillion won while sales fell to 47.45 trillion won.

Operating income of the mobile unit, which had been the biggest contributor to earnings since 2011, dipped to 1.75 trillion won from a record 6.7 trillion won a year earlier.

Samsung introduced two new Note devices with larger displays last month as it tried to blunt the impact of the new iPhone 6 and iPhone 6 Plus that debuted September 19.

Profit margins on smartphones are falling as competition pushes down the average selling price and Samsung boosts marketing spending to rekindle growth. That pressure will continue in the “near-term,” the company said today.

Samsung shipped 102 million mobile phones in the quarter, Senior Vice President Robert Yi said on a conference call today.

Baburajan K
editor@gizmolead.com

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