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Samsung Electronics gears up to keep mobile grip after weakest profit in 3 years

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Published : 2015-01-29 14:07
Updated : 2015-01-29 15:25

Samsung Electronics Co. set out to reclaim its edge in the handset business that on Thursday revealed its weakest annual earnings in three years for the world's top smartphone maker, as competition is expected to get fiercer with global rivals in both the high- and low-end markets.

The tech giant booked a net profit of 23.4 trillion won ($21.6 billion) in 2014, down 23.2 percent from 30.5 trillion won the previous year, the company said in a regulatory filing.

The operating profit fell 32 percent on-year to 25.0 trillion won in the January-December period, confirming the weakest performance since it logged 15.6 trillion won of operating income in 2011. Overall sales slid 9.9 percent on-year to 206.2 trillion won last year.

Profit from the mobile business, the company's cash cow, plunged 64 percent to 1.96 trillion won in the fourth quarter, compared with 5.47 trillion won a year earlier.

Samsung has been losing its share to Chinese upstarts, including now the world's third-largest Xiaomi Inc., in the low-end market as these new firms have grown fast by cranking out cheaper handsets.

The Korean tech firm is also facing challenges from its rival Apple Inc. in the premium market, as the U.S. firm has picked up sales with its latest iPhone 6 lineup that touts a bigger screen size.

Apple on Tuesday (U.S. time) posted a record high quarterly net income of $18 billion in the quarter ending in December, selling 74.5 million units of handsets, up 46 percent from a year ago.

Analysts here predict Apple has likely caught up with Samsung in smartphone shipments, as Samsung is expected to have sold 76 million units in the fourth quarter. Market tracker Strategy Analytics said the two firms tied in their smartphone sales in the quarter.

Robert Yi, the IR head of Samsung Electronics, said in a conference call that followed the earnings disclosure the company sold 95 million units of handsets in the fourth quarter, while declining to give an exact figure for smartphone sales.

The Suwon-based company said it plans to roll out an "innovative premium handset" this year that comes with a "special function," hinting that it will maintain the two-track strategy for smartphone segment -- focusing on both premium and low-end lineups.

The person at the IR panel didn't elaborate further.

The firm said it will extend the launch of the mid- to low-end A5 and A3 lineup, debuted in India late last year, to a global reach, while increasing shipments of metal-clad budget phones to target the younger generation in emerging markets.

"We will strengthen our industry leadership with the slim design of the metal-clad products and AMOLED display," he said.

Samsung's display and memory chip segments arrested a further decline in earnings, as firm demand for LCD, OLED panels and DRAM chips generated operating profit of 9.43 trillion won in 2014.

Shares of Samsung Electronics, the top-listed firm by market cap, closed down 1.31 percent to 1,360,000 won on Thursday, while the broader KOSPI shed 0.54 percent.

Related to mobile processors, Samsung said, during the conference call, it is in talks with several firms about supplying its own Exynos processor.

The market has been speculating that Samsung may install Exynos in its next Galaxy smartphone instead of the Snapdragon 810 made by U.S. Qualcomm Inc., after issues were raised about its overheating problems.

Industry sources also gave an outlook that Samsung has likely stolen Apple away from Taiwan's TSMC, the world's largest chip foundry operator, to sell its application processors (AP) for the upcoming iPhone 7.

Samsung said in an emailed statement that its System LSI sector, which involves making APs for mobile devices and foundry businesses, will be a driver for growth in 2015, as the company is ready to ramp up production of the 14-nano FinFET technology, a 3-dimensional chip used in mobile devices.

For its first-quarter outlook, analysts expect Samsung may see profit dwindle in the first three months of this year from the previous quarter, citing slowing demand from the offseason.

"But the IM (mobile) sector should be able to pull off 1.83 trillion won in operating profit as marketing costs will decrease and more new models are scheduled to come out," said Lee Min-hee, an analyst from I'M Investment & Securities Co.

Analysts projected a moderate recovery for the tech bellwether in 2015, as the mobile division is forecast to break out of the slump and the chip sector holds high prospects on the back of an increase in production of the advanced 20-nanometer technology.

Samsung's fourth-quarter results were in line with the earnings guidance released early this month. Operating profit came to 5.29 trillion won, down 36.4 percent from a year ago, with net income slumping 27 percent to 5.35 trillion won in the quarter ending in December. Sales slid 11 percent to 52.7 trillion won. (Yonhap)