Samsung prepares for weak smartphone growth

With Apple challenging its domination in China, Samsung is bracing for the weakest growth in its smartphone profits since 2007.

Samsung’s mobile devices business, which accounts for two thirds of the Korean firm’s profit, will come under pressure once arch-rival Apple makes its smartphones available through China Mobile Ltd from 17 January.

For seven years, Samsung has also sold its units in China through China Mobile Ltd.

The Cupertino company is also expected to release smartphones with bigger screens by autumn, neutralising a selling point enjoyed by the Korean phone maker since it introduced its Galaxy Note in 2011.

“Profit decline in mobiles will be inevitable, as the majority of growth will come from cheaper, low-margin phones, while competition at the high end will get only tougher with Apple’s iPhone deal in China,” noted Kim Young-chan, analyst at Shinhan Investment.

After growing eightfold in size over the last five years, Samsung’s mobile devices unit will likely see its operating profit increase by a low single digit or marginally decline in 2014, according to Thomson Reuters’ Starmine SmartEstimate.

“Its business was already hit in the fourth quarter by Apple’s strong iPhone sales, and the impact will continue at least until the end of the first quarter,” added Kim.

Samsung is expected to release its October-December earnings guidance this Tuesday, which will likely indicate an operating profit growth of ten per cent at US$9.24 billion, said Starmine.

The figure would be four per cent lower than the operating profit growth recorded from July to September.

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