Samsung Q1 Profits Slump In Smartphone War With Apple.
Samsung
may have helped pioneer bigger screen phones, but it’s struggling to
keep its profits from cratering now that Apple has picked up the trend
too. Samsung’s net profits dropped by 39% in the first quarter as the
booming popularity of the iPhone 6 put pressure on the Korean
electronic giant’s mobile-phone making business, whose earnings more
than halved.
Samsung reported a first quarter profit of 4.63 trillion
won ($4.35 billion), down from 7.5 trillion won last year, and below the
4.97 trillion won expected by analysts, according to FactSet. A rise in
profits at Samsung’s memory chip business, the only unit of the
company’s three-main divisions to see an increase, helped cushion the
overall profit decline.
The most damage took place in Samsung’s mobile business,
which brought in 2.74 trillion won in the first quarter,
representing less than half the 6.43 trillion won that the unit
generated last year.
Samsung’s appeal in the last few years have been its
offering of premium, large-screen phones, but Apple’s release of its
first large-screen phone the iPhone 6 and iPhone 6 Plus late last
year have eroded Samsung’s claim to that market.
Apple is doing particularly well against Samsung in China.
The iPhone maker’s global market share in shipments jumped to 14% from
11% in the first quarter, largely due to its strength in China,
according to the latest research from Strategy Analytics.
Apple revealed on Tuesday that it had sold 61 million iPhones in its record first-quarter, a 40% jump from last year, to book $13.6 billion in net profits.
Its sales in China jumped by an extraordinary 71% to $16.8
billion, to help make China Apple’s second-biggest market after the
U.S.
Samsung is still the world’s biggest mobile phone vendor,
but its share of the global market slipped to 22.2% from 27.4% last
year. Strategy Analytics estimates that it sold 99 million mobile phones
in the first quarter, down from 113 million a year ago.
While that number is higher than
Apple’s 61 million for Q1, Samsung has a more diversely priced portfolio
of low-to-mid-range devices like the Galaxy A series.
Analysts say strong demand for Samsung’s Galaxy S6 suggest the company could report a better performance in the second quarter.
Samsung also said its
earnings could rise in the second quarter thanks to expanded sales of
the S6 and curved-screen S6 Edge. But it added that profits would remain
under pressure thanks to marketing costs,
and intensifying competition from low-cost smartphone makers like
China’s Xioami, which would put further pressure on sales of
Samsung’s mid-to-low-end devices.
forbes.
