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Weak smartphone demand haunts Samsung as profits continue to fall

The company has estimated that its operating profit will fall by 24% compared to the same period a year ago, citing “weak demand” for smartphones and increased competition in China and Europe.

Image: Justin Tallis/PA Wire

A SLOWDOWN IN tablet sales and increasing competition in the lower-end of the smartphone market were some of the reasons Samsung provided as it braces itself for another decline in profit.

Samsung has estimated that its operating profit will fall by 24% to 7.2 trillion won (€5.2 billion) compared to a year ago, which would make it the third quarter in a row it experienced a decline in profit.

The company issued a one-page explainer in advance of its second-quarter earnings report, explaining the reasons for this decline and to reassure investors that things will change.

Among the reasons given included an over-delivery of smartphones which led to an excess amount of devices in Europe and China. Increased competition in the mid- and low-range market and “weak demand” for smartphones in these areas caused problems for the company.

Samsung said it also saw more people choosing to wait for 4G-enabled smartphones instead of buying current 3G versions, while tablet sales suffered greatly due to customers choosing smartphones with larger screens instead.

The growing strength of the Korean Won against the US Dollar, Euro and most currencies, has meant that exports have resulted in less revenue, and increased spending on advertising also contributed to these problems.

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The company says it “cautiously expects a more positive outlook in the third quarter” when it releases its new smartphone lineup. It said it will continue to focus on other areas like wearable devices, and smart home applications.

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About the author:

Quinton O'Reilly

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