Samsung profits slump on smartphone margins squeeze | Business| Economy and finance news from a German perspective | DW | 08.04.2014
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Samsung profits slump on smartphone margins squeeze

South Korea’s electronics giant Samsung is on track to post its second consecutive quarter of declining profits. The firm’s key smartphone business is under pressure from cheaper rivals as markets near saturation.

Samsung expected its operating profit to fall 4.3 percent between January and March to reach 8.4 trillion won (5.7 billion euros, $8 billion), the South Korean electronics manufacturer announced late on Tuesday.

The year-on-year decline in the first quarter of 2014 marked the second consecutive quarter of retreating profit, the world's largest technology firm said, although compared with the previous quarter operating profit rose by about 1 percent.

The estimate was largely in line with analysts' expectations, who had predicted that Samsung's key smartphone business would slow as mature markets in North America and Europe near saturation.

“The operating profits fell as profit margins in smartphones were falling and the growth rate in smartphone sales was decreasing due to growing competition,” Young Park, analyst with Hyundai Securities, told the AFP news agency.

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Technology market research firm IDC has recently estimated that the average selling price of smartphones would fall to $265 by 2017 from $337 in 2013 and $387 in 2012. Samsung, which manufactured more than 30 percent of all smartphones sold across the world last year, has priced the newest version of its flagship Galaxy S smartphone about 10 percent cheaper than its previous S4 model.

Samsung hopes its Galaxy S5 smartphone will cement the firm's leadership in the high-end mobile phone market, and help achieve a full-year operating profit of 37 trillion won in 2014.

uhe/msh (AFP, Reuters, dpa)

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