Samsung Q2 results signal further drop in profit

The South Korean technology giant has revealed a drop in profit of 8 percent year on year, attributed to increased competition on all fronts of the smartphone sector.
Written by Corinne Reichert, Contributor

Samsung Electronics has reported an 8 percent year-on-year drop in its net profit, from 6.25 trillion won ($5.4 billion) down to 5.75 trillion won ($4.9 billion).

The Q2 results (PDF), released on Thursday, revealed total sales for the second quarter of 2015 of 48.54 trillion won ($41.7 billion) -- up 3 percent from Q1's 47.12 trillion won, but down by 7.3 percent from the 52.35 trillion won reported in the same period last year.

The results showed declines in both its IT and Mobile (IM) division and its Consumer Electronics (CE) business; CE sales fell by 13.9 percent year on year, from 13 trillion won to 11.2 trillion won; while IM sales fell by 8.3 percent, from 28.45 trillion won to 26.06 trillion won.

There was a slight rise in profit from Q1 2015, however. Samsung attributed this growth, up 11.9 percent from 4.63 trillion won to 5.75 trillion won, to its semiconductor business and the launch of its new UHD TV models.

The company's semiconductor and display panel businesses were the only segments to show increased sales year over year, with the combined Device Solutions division rising by 10.1 percent, from 16.23 trillion won in the same period last year to 17.87 trillion won this year.

Operating profit was at 6.9 trillion won for the quarter, down 4 percent over the year, from 7.19 trillion won in Q2 2014.

Samsung reported total assets of 231.7 trillion won, and total liabilities of 57.8 trillion won.

The technology company blamed the fall in its CE and IM divisions on "quite muted" smartphone sales, despite the much-hyped launch of the Galaxy S6 and S6 Edge devices.

The company's sales have been steadily declining off the back of increased smartphone competition in both the high-end segment, largely from Apple's devices, and the low-end market, from inexpensive, feature-rich products emerging in China.

In December last year, it was revealed that Chinese smartphone manufacturers had surpassed their counterparts in South Korea, with Huawei, Xiaomi, Lenovo, ZTE, Oppo, Coolpad, TCL, Vivo, and Gionee recording a combined 31.3 percent of global market share in 2014, while Samsung and LG reported a total global market share of 30.1 percent.

"The Free Trade Agreement between South Korea and China is the best way for South Korea to boost up its core industries, which are now in crisis. Securing new technology and finding new businesses are essential for South Korea to beat China," said Yoo Hwan-ik, assistant secretary general of the Federation of Korean Industries' (FKI) Industrial Research division, at the time.

In China, Xiaomi edged out Samsung in market share for 2014, with 12.5 percent share in comparison to Samsung's 12.1 percent share.

While Samsung remained the top vendor in Western Europe for 2014, its lead over Apple declined, with its market share falling from 42.6 percent to 35 percent year on year, while Apple's climbed from 19.6 percent to 21.2 percent over the same period.

In regards to global smartphone shipments, Samsung retained its top spot in Q1 2015, totalling 291.2 million -- but this was down 9.2 percent from the last quarter of 2014. The company had 27.8 percent global market share in the first quarter of 2015, while Apple held 19.9 percent. Ranking third was Huawei, with 7 percent global market share, and LG rose to fourth place, with 6.2 percent.

Samsung's fall in profit marks a continuation of a recent trend. The tech giant's Q3 2014 net profit plummeted by 49 percent, from 8.24 trillion won reported in Q3 2013 to 4.22 trillion won ($4 billion) in Q3 2014.

At the end of January, Samsung's mobile division reported fourth-quarter 2014 profits of 1.96 trillion won ($1.8 billion), down from 5.47 trillion won year on year. For the full year, the technology company's IM sector reported a massive drop-off in profit of more than 40 percent, from 24.96 trillion won to 14.56 trillion won. Samsung Electronics' Q4 profit came in at 5.3 trillion won, down from 8.31 trillion won in 2013.

In April this year, the company reported a 57 percent drop in its IM profit for Q1.

Samsung on Thursday admitted to a weak first half of the year, but said it is planning to improve its overall earnings through planned mid- and low-end products, and by continued high sales of its semiconductors and UHD TVs.

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