Samsung Electronics forecasts fall in profit
- 7 January 2014
- From the section Business
Samsung Electronics, the world's biggest maker of mobile phones and TVs, has forecast a fall in profit for the October-to-December quarter.
It expects to make an operating profit of 8.3 trillion won ($7.8bn; £4.8bn) for the quarter, down 18% from the previous three months.
Compared with the same period in the previous year, it is a 6% decline.
Samsung did not say what caused the dip, but analysts said falling profit margins for smartphones had hurt it.
"As the growth in the smartphone sector matures, and vendors seek expansion in emerging economies, both prices and operating margins have been coming down," Manoj Menon, managing director of consulting firm Frost & Sullivan, told the BBC.
Mr Menon added that profit margins of smartphone makers were likely to "remain under pressure" in the coming months.
Samsung has enjoyed robust growth in recent years, fuelled in part by the success of its smartphone division.
The success of its Galaxy range of smartphones saw the South Korean firm displace Nokia as the world's biggest phone maker in 2012.
However, competition in the sector has increased with other phone makers launching new products.
One of Samsung's biggest rivals, Apple, launched two new models of its iPhone - the top-end 5S and a cheaper 5C - in September.
Also in September, Nokia - whose phone division has been bought by Microsoft - unveiled two new phone models.
Taiwanese firm HTC launched its latest handset, the Android-powered One Max, in October.
Analysts said it was likely that the increased competition, especially the launch of new models by Apple, had hit Samsung's performance in the last quarter.
"Clearly Samsung is now facing its stiffest competition in the smartphone sector," said Mr Menon.
"Apple did launch its new phones during the quarter and early estimates indicate that they may have had a record quarter for iPhone sales.
"That may also have taken some consumers away from Samsung and hurt its revenue and profits," he added.
Samsung is likely to face further competition in the coming months in China - the world's biggest mobile phone market.
This is after rival Apple agreed a deal to sell phones to subscribers of China Mobile - the country's biggest carrier with more than 760 million subscribers.
Analysts have said the deal, coupled with the launch of a new cheaper version of the iPhone, may help boost Apple's share of the Chinese market - currently dominated by Samsung.
The South Korean firm is currently the biggest mobile phone vendor in China. It had an 18.3% share of the China market in the July-to-September quarter, according to research firm IDC.
Meanwhile, some analysts suggested that Samsung's fourth-quarter earnings may also have been affected by a special bonus given to employees and higher marketing costs.
"Samsung's special incentive payments to employees including domestic and overseas units appear to have been much larger than the market expected," said Kim Young-chan, tech analyst at Shinhan Investment Corp.
"Marketing costs of its mobile business might have also been larger."