Samsung Electronics has reported a wider-than-expected decline in its earnings for the final quarter of 2015 as its two core businesses face a slowdown amid weakening global demand for consumer electronics.
The company also hinted at a profit decline for the first half of this year.
Samsung's net profit for the October-December period plunged 40 percent from a year earlier to 3.2 trillion won ($2.65 billion).
The result fell short of expectations, even after considering the negative impact from foreign currency exchange rates estimated at 400 billion won. Analysts expected 5.1 trillion won in net income, according to FactSet, a financial data provider.
Sales edged up 1 percent to 53.3 trillion won for the quarter, while operating income rose 16 percent to 6.1 trillion won, in line with its earnings preview this month.
The latest results reflect new challenges for Samsung as two core businesses, smartphones and semiconductors, face a slowdown.
Weakening global demand for smartphones is taking a toll on Samsung's sales of mobile components to companies such as Apple, as well as sales of Samsung's own mobile devices.
The company is the world's largest maker of memory chips used in PCs and mobile devices. It is also the world's largest maker of smartphones and television sets.
For the full year, it earned 19.1 trillion won (AU$15.8 billion), down 19 percent from the previous year and the lowest level in four years. It was the second year in a row with a decline in annual net income after the company's earnings peaked at 30.5 trillion won in 2013.
During the final quarter of 2015, the semiconductor business reported its first quarter-over-quarter profit decline in more than one year.
It logged 2.8 trillion won in operating income, about 25 percent lower than the previous quarter but slightly higher than a year earlier.
In addition to the softer global demand for mobile devices and PCs, an oversupply of memory chips that pushed down prices also drove the weaker-than-expected profit growth.
"Demand for memory chips will increase due to growth in contents stored in high density servers featuring DRAM and SSD, as well as smartphones with more advanced features," the company said in a release.
Looking ahead, the company said it will develop 10nm DRAM, continue mass production of second-generation 14nm components, and lift sales in high-density DRAM and NAND storage.
Earlier this month, the company revealed that it had begun mass production of logic chips using its second generation 14-nanometer FinFET process, and signed a deal to exclusively produce Qualcomm's Snapdragon 820.
The mobile phone business posted its second straight quarterly profit decline with 2.2 trillion won in operating income.
Though Samsung expanded sales of its high-end smartphones, including the Galaxy Edge series with curved displays, consumers flocked to cheaper smartphones, driving down its overall profit.
For next year, the company said it expects single digit growth in smartphones and tablets, with growth to be seen in the low-end, and will look to continue to expand LTE services in its network business.
Analyst firm Ovum said overnight that 4G long-term evolution (LTE) subscriptions reached 1.05 billion during Q4 of financial year 2015, with subscriptions set to grow by double digits to hit 3.62 billion by 2020.
With growing pressure to seek new revenue sources, Samsung hinted about its plans.
It pointed to transparent, mirror, automotive, and flexible displays as future display business areas. And it singled out home and health as areas it will initially focus on with internet-connected gadgets and home appliances.
"For the consumer electronics business, the company plans to lead the Smart Home era with diverse IoT-enabled products," it said.
Earlier this month, Samsung partnered with Singapore's largest telecommunications provider, Singtel, and its NCS subsidiary to collaborate on designing, building, and launching smart home solutions.
The three companies will begin field trials, and plan to roll out solutions starting early 2016.
Last month, Samsung announced that all of its smart TVs will be used for controlling IoT devices in the home, including connected lights, sound, and security devices.
Samsung reiterated its promise last year to increase shareholder returns, including a plan to buy back and cancel shares. The move did little to shore up its share price. After the earnings release, the company's shares traded 2 percent lower when the Seoul bourse opened.
Yesterday, Apple reported a first quarter profit of $18.4 billion, with revenue coming in at $75.9 billion.
Sales of its iPhones slightly increased, from 74.5 million last year to 74.7 million, with iPad shipments down by 5 million units from 21.4 million to 16.1 million. Mac sales were down 4 percent to 5.3 million units, while the services category, which include Apple Pay and iTunes, saw revenue increase 26 percent to $6.05 billion.
Other products, including the Apple Watch, experienced a revenue boost of 62 percent to $4.4 billion compared with this time last year.