Samsung has grown massively in recent years thanks to its huge range of smartphones; it has been the world’s largest mobile phone manufacturer since it overtook Nokia in 2012, with its handset division now accounting for the majority of its turnover.
But its operating profit has tumbled in the last three quarters – from April to June 2014, it made £4.2 billion, compared with £5.45 billion in 2013. Analysts had predicted the firm to make £4.64 billion over this timeframe.
The tech giant pointed to the strength of the Korean Won and increasing pressure from Chinese mobile handset manufacturers, alongside a slowdown in the global smartphone market and the second quarter being “seasonally weak” for Chinese smartphone sales, as factors behind the fall in profits. The Korean Won rose 7% against the Euro and 11% against the US dollar over the last 12 months.
Although it said it expects the release of its new smartphone line-up in the third quarter to boost its sales, the growth of the smartphone market has become increasingly muted, while competition within the sector has escalated, which could see profit margins decline even further.
While there is still room for high-spec, advanced smartphones, global growth is focused on low-margin, high-volume handsets for consumers in the developing world. Samsung Electronics has said that growth for its smartphone and television products is dropping and that it needs to overhaul its product range and begin to work in different manners, and said it seeks to expand in sectors such as medical and business-to-business equipment, wearable tech and internet-of-things products.
Other smartphone companies such as ZTE, Xiomi, HTC and Huawei are nipping at the heels of Apple and Samsung, and while they don’t look like they’re going to unseat these companies from their thrones just yet, the smartphone market could look very different in a few years’ time if Samsung’s difficulties continue.