Samsung on Tuesday flagged a near 60 per cent on-year plunge in its third quarter operating profit, as its key smartphone sector continued to struggle in the face of increased competition.
Operating profit for the July-September period was estimated at 4.1 trillion Korean won, down 59.6 per cent from the third quarter last year, the company said.
Sales were estimated at 47tn won, down 20.4 per cent from 2013.
While smartphone shipments increased slightly, “operating margin declined due to increased marketing expenditures and a lowered average selling price, driven by reduced proportional shipments of high-end models coupled with price decreases for older smartphone models”, the South Korean electronics giant said in an explanatory note.
The company warned that uncertainty in the mobile sector would carry through into the fourth quarter, although it promised a new line-up of top-end smartphones featuring “new materials and innovative designs”.
In July, Samsung had reported a 20 per cent drop in net profit for the second quarter, and its shares are sitting at a two-year low.
The mobile market, which has been the key driver of Samsung profits in recent years, has become increasingly saturated, while competition has intensified from cheaper Chinese handset makers such as Huawei and Lenovo.
The world’s largest smartphone maker has a diverse product line ranging from memory chips to home appliances, but more than half of its profits are generated by mobile devices.
The explanatory note said shipments and profits in the company’s display panel business had also fallen in the third quarter due to weaker demand in the mobile sector.
It did not provide a breakdown of profit estimates by businesses.
Samsung’s smartphone profits have been hit at both ends of the spectrum.
Its previously all-conquering flagship Galaxy S series has come under renewed pressure with the release of the popular iPhone 6 from arch-rival Apple, which has also challenged Samsung’s dominance of the oversized smartphone market with the introduction of the larger-screen iPhone 6 Plus.
In the low- to mid-range smartphone segment, the challenge has come from Chinese handset makers who have begun to make substantial inroads into Samsung’s market share.
According to International Data Corp, a record-high 295.3 million smartphones were shipped worldwide in the second quarter.
Samsung remained the world’s top vendor, moving 74m handsets, but saw its overall market share slip seven per centage points to 25.2 per cent, while China’s Huawei nearly doubled its shipments from the same quarter a year ago.
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