Samsung forecast slowing smartphone market

Samsung expects its operating profit and sales to decline in the second quarter over the same period last year.

Electronics giant Samsung expects its operating profit to decline 24.5 per cent to 7.2 trillion won in the second quarter from 9.53 trillion won over the same period last year. It also expects sales to decline 9.4 per cent to around 52 trillion won.

The South Korean firm attributed the poor results to the increased competition in the European and Chinese markets, which led to higher inventories of low- and medium-end smartphones.

The company also noted that its earnings were affected by increased price competition as well as “weaker demand for 3G products ahead of expected growth of 4G LTE products in the Chinese market.”

The stronger Korean won against other currencies like the euro and the US dollar also affected earnings, it said.

Samsung also revealed that tablet sales were sluggish in Q2 because tablets have longer replacement cycles than smartphones.

Apple and Samsung generally depend on smartphone sales for two-thirds of their revenue, but they have recently been under pressure from handset makers in China. The two companies saw their market share decline in the first quarter, according to Strategy Analytics research.

The South Korean firm saw its global market share marginally decline from 32 per cent to 31 per cent year-over-year. This was its first decline since Q4 2009. Apple grabbed 15 per cent of the global market, down from 17 per cent previously, as it shipped 43.7 million iPhones.

Together, the share of the two companies slid from 50 per cent in Q1 2013 to 47 per cent in Q2 2014, primarily due to increased competition from second-tier brands like Lenovo and Huawei, said Strategy Analytics.

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