According to an earnings report, Samsung’s quarterly net profit sinks 40 percent to $2.65 billion as its chip business saw the weakest quarterly profit rise in nearly four years. Additionally, its mobile phone sales did not top expectations either.
As a result, the company lacked two major sources of revenue among an international economic downturn triggered by a slowdown in smartphone sales worldwide. TVs and other electronics only account for 5 percent of the Korean giant’s operating profit
But, Samsung’s ordeal is not yet over. Executives expect competition between smartphone makers to become fierce due to international context.
Executives’ grim forecast threw the company’s stock down 2.6 percent on Jan. 28. Robert Yi told investors that it would be rather challenging to keep up the pace and match 2015 earnings levels in the first and second quarters. Yi mentioned low demand and an economic downturn among factors that may hit the smartphone sector the hardest.
Nevertheless, Samsung hopes for a revival in the second half of the year. Plus, executives are confident that on the long run a revamped ecosystem of apps and hardware would attract more customers, while also keeping interested the existing ones.
But revamping the entire ecosystem takes time. So, the company momentarily needs to rely on smartphone and chip sales to push up growth in the years to come. In the last three months, the company managed to push operating profit from chip sales by only 3.7 percent.
Samsung also plans to focus especially on customers that can afford low- and midrange handsets along with people in the emerging markets that buy their first smartphone. Still, most analysts expect the South Korean tech giant’s operating profits to sink from last year’s level.
C.W. Chung, an analyst from a Seoul-based business research firm, believes that if Samsung manages to maintain 2015 profit levels through the end of the year that would be ‘impressive.’
But Samsung is not the only tech industry player that struggles with weak sales. Qualcomm and Intel, two major chipmakers, also reported weak growth as the demand for mobile devices is lagging. Additionally, Apple unveiled its first revenue decline in more than a decade as iOS device sales also slowed.
On the other hand, Samsung’s situation is more delicate. As the world’s largest manufacturer of memory chips and smartphones, weak demand for these products would bite hard into the company’s profits.
Image Source: Flickr