Samsung mobile unit suffers 30% fall in Q2 operating profit

Samsung announced an anticipated drop in profit for its mobile unit, off the back of lower smartphone and tablet shipments and increased costs.

The South Korean company cited decreases in its “mid- to low-end” smartphone shipments, due to weak demand in the EU and lower 3G demand alongside intensified price competition in China.

Tablet shipments were also down due to an overall weakness in the market, including a slowed demand for replacement devices.

Costs increased due to the ramp-up in sales of its latest flagship smartphone, Galaxy S5, and inventory reduction activities.

The company also said that earnings were down sequentially in its networks business, due to decreased LTE investments in domestic and overseas markets under “low seasonality”.

Operating profit in Samsung’s IT & Mobile unit, where mobile accounts for the vast majority of sales, decreased by 29.6 per cent to KRW4.42 trillion (US$4.23 billion), on sales of KRW28.45 trillion, down 19.9 per cent.

While Samsung does not give out details of device volumes, Strategy Analytics estimated that Samsung’s shipments were 74.5 million units during Q2, down from 76 million a year earlier. The handset manufacturer’s market share dipped to 25 per cent from 33 per cent, although it is still comfortably ahead of second-placed Apple.

Looking forward, Samsung said it expects smartphone and tablet shipments to grow during the second half of 2014, under “strong seasonality”.

For smartphones, high-end demand will be led by TD-LTE expansion in China, and lower inventory levels in Europe. Emerging markets will drive growth further down the range, although the company also warned of intensified competition with new product launches.

Tablet demand is expected to grow under strong seasonality (especially during the Christmas holiday sales period) and with new model launches, although again price competition is expected to intensify.

On a group level, the company reported a net profit of KRW6.25 trillion, down 19.6 per cent year-on-year, on revenue of KRW52.4 trillion, down 8.9 per cent.