Samsung vows to revamp its smartphones after profits plummet 60%: Poor sales and competition from Apple has led to a three-year low
For the third consecutive quarter, Samsung's profits have taken a hit.
And
the smartphone maker has reported its lowest quarterly earnings in
three years, after profits plummeted by 60 per cent compared to this
time last year.
Compared
to a record-high of £6 billion ($9.5 billion) in 2013, the company
achieved £2.5 billion ($3.8 billion) profits for July to September.
Samsung
(headquarters in Seoul pictured) has reported its lowest quarterly
earnings in more than three years. Compared to a record-high of £6
billion ($9.5 billion) in 2013, the company achieved £2.5 billion ($3.8
billion) profits for July to September this year
These
figures are in line with what Samsung predicted earlier this month, and
the firm is blaming the drop on weak sales of its new Galaxy model.
The South Korean electronics giant became the biggest smartphone brand thanks to the popularity of earlier Galaxy models.
But the larger screen on Apple's new
iPhone 6 has been linked with luring customers away from the larger
Galaxy range. While in China, local brands are making inroads into
Samsung's business.
ast month, Samsung also received upbeat initial responses to its Galaxy Note Edge smartphone (shown), a smartphone with a curved side screen that can display weather, news, apps and other information. But the supply volume for the Edge smartphone will be limited, not giving a big boost to its earnings, analysts said
In response to the dramatic drop, Samsung has vowed to revamp its smartphone range to win back customers.
Executives
at the South Korean firm said it would overhaul its lower-tier line-up
to boost price competitiveness, and use higher-quality components to set
its devices apart.
'The
mid-to-low end market is growing rapidly, and we plan to respond
actively in order to capitalise on that growth,' said Samsung Senior
Vice President Kim Hyun-joon during a conference call with analysts.
In
a rare acknowledgement, the company's head of investor relations added
that Samsung had lagged behind changing market conditions.
The company's response 'was not quick enough,' said Robert Yi.
It
plans a significant change in smartphone strategy for next year to seek
more 'efficiency,' suggesting that the number of new handsets might be
reduced.
This would allow the company to focus more on each product.
The
earnings are below the median of analysts' expectations of £3 billion
($4.9 billion), according to FactSet, a financial data provider.
The decline in Galaxy sales has also hurt demand for Samsung components such as an advanced display called OLED.
'The operating margin declined due to increased marketing expenditure and lowered average selling price,' Samsung said.
The company said it 'cautiously expects increased shipments of new smartphones and strong seasonal demand for TV products'.
+4
Analysts claim the bigger iPhones
released last month (shown) will likely take away customers who favoured
the Galaxy's larger screens. In emerging markets, such as India and
China, Samsung's smartphone sales have been overtaken by local rivals
+4
The latest news comes despite the
launch of the Samsung Galaxy S5 (pictured) earlier this year, which was
received by mostly rave reviews. The Galaxy S5 handpicked features from
its competitors and put them all into a single handset, with some
calling it a 'superphone'
In emerging markets, such as India and China, Samsung's smartphone sales were overtaken by local rivals.
'Rather
than seeking stability, Samsung should seek to distinguish [its phones]
with Galaxy's design policies,' Lee Seung-woo, an analyst at IBK
Securities said.
The
company moved the launch of the Galaxy Note 4, a large smartphone with a
stylus, to late September from October after Apple unveiled the iPhone 6
and 6 Plus.
It
also began sales of the Galaxy Note 4 in China last month, getting an
early start in the world's most populous country before Apple.
SAMSUNG LEADS PHONE MARKET
Despite a drop in profits, Samsung has retained its leading position in the global smartphone market during the last quarter.
But, it was the only top five manufacturer to record a sales decline.
Apple,
Xiaomi, Lenovo and LG all posted more than 15 per cent growth in their
smartphone shipments, according to market research firm IDC.
Samsung's
shipments fell 8 per cent to 78.1 million smartphones in the third
quarter, and its market share eroded to 24 per cent from 33 per cent
this time last year.
Samsung's rise to the world's top smartphone maker was helped by its partnership with Google's Android operating system.
But other Android handset makers are matching Samsung in terms of performance, features and design.
Shares of Samsung Electronics did rise 4 per cent, however, in Seoul.
Although the earnings were weak, they were better than some forecasts.
Plus Samsung said it is expecting a strong fourth quarter in the run up to Christmas.
ast month, Samsung also received upbeat initial responses to its Galaxy Note Edge smartphone (shown), a smartphone with a curved side screen that can display weather, news, apps and other information. But the supply volume for the Edge smartphone will be limited, not giving a big boost to its earnings, analysts said
Last
month, Samsung also received upbeat initial responses to its Galaxy
Note Edge smartphone, a smartphone with a curved side screen that can
display weather, news, apps and other information.
But the supply volume for the Edge smartphone will be limited, likely not giving a big boost to its earnings, analysts added.
With growth momentum in smartphones sagging, Samsung is moving to step up its presence in the semiconductor business.
This
week, Samsung announced a £9 billion ($15 billion) investment plan to
build a new semi-conductor fabrication plant in the South Korean city of
Pyeongtaek.
The construction will begin before the summer next year and begin operations during the second half of 2017.
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