Samsung Electronics Co estimated yesterday that its operating profit would plunge nearly 25 percent on year in the second quarter of the year, as cheap Chinese devices and a strong South Korean won hammered down its share of the global smartphone market.
Operating profit was estimated at 7.2 trillion won (US$7.1 billion) for the April-June period, compared to 9.53 trillion won a year ago — the South Korean electronic giant’s third straight quarter of year-on-year decline.
The second-quarter operating profit was down 15.2 percent from the 8.49 trillion won posted in the previous quarter.
The profit drop had been widely expected, but yesterday’s forecast still missed analyst estimates.
Samsung did not provide net income or details of division earnings ahead of the official earnings report to be filed later this month.
In an unusual move, yesterday’s forecast was accompanied by an explanatory note that the company said was to “address market and investor concerns” prior to the audited earnings release.
“The company witnessed a slowdown in the overall smartphone market growth and saw increased competition in the Chinese and some European markets,” it said.
“This led to higher inventories for the medium and low-end smartphones,” it said, adding that earnings had also been hit by the appreciation of the won against the US dollar, euro and most emerging-market currencies.
The surging won is currently running at six-year highs against the dollar, impacting South Korea’s export-driven economy.
Sales in the April-to-June period stood at 52 trillion won, down 9.5 percent from a year earlier and 3.1 percent from the first quarter.
Samsung said it “cautiously expects” a more positive outlook in the third quarter, with the release of its new smartphone lineup, and a much lower marketing expenditure compared to the second quarter.
However, the next quarter is expected to see competition heat up with the anticipated launch of the iPhone 6 by chief rival, Apple Inc.
Samsung said that “price competition” in China had boosted inventory in a crucial smartphone market — a situation exacerbated by weaker demand in Europe.
The company does not disclose smartphone shipments, but analysts say it moved about 78 million units in the quarter ended on June 30 — short of the 90 million units many in the market had anticipated.
The market had largely factored in the profit drop and Samsung shares closed up 0.23 percent on the day at 1.295 million won.
Samsung maintained a leading position in the global smartphone market in the first quarter of this year, but its market share fell for the first time in four years to 31.2 percent from 32.4 percent a year ago.