Samsung reports earnings slump days after Apple boasts biggest corporate profit in history

South Korean tech giant Samsung reported a net profit of 5.3 trillion won (S$6.49 billion) for the October-December period, compared to 7.3 trillion won a year ago. -- PHOTO: REUTERS
South Korean tech giant Samsung reported a net profit of 5.3 trillion won (S$6.49 billion) for the October-December period, compared to 7.3 trillion won a year ago. -- PHOTO: REUTERS

SEOUL (AFP) - Samsung Electronics, the world's largest smartphone maker, posted a 27 per cent decline in net profit for the fourth quarter Thursday, days after arch rival Apple reported the biggest corporate profit in history.

The South Korean tech giant reported a net profit of 5.3 trillion won (S$6.49 billion) for the October-December period, compared to 7.3 trillion won a year ago.

The profit fall was cushioned by a boom in high-margin chip sales that helped offset the downturn in the key mobile sector, which has struggled in the face of intense competition from cut-price Chinese rivals.

Operating profit in the semi-conductor division rose 35.7 per cent to 2.7 trillion won.

The slowdown contrasted sharply with the triumphant surge in the fortunes of US tech titan Apple, whose net profit for the same quarter stood at US$18 billion (S$24.35 billion) - the largest ever made by a public company.

Apple's performance was driven by the sale of 74.5 million iPhones, which included a doubling of sales volume in the crucial Greater China region.

The South Korean behemoth, which is also facing a once-in-a-generation leadership change, had reported a 20 and 50 per cent net-profit decline in the second and third quarters of 2014 respectively.

It has been a dramatic reversal after several years of stellar growth, driven by the once all-conquering mobile division.

The company's flagship Galaxy phones have suffered in the high-end market from the popularity of Apple's iPhone 6, while dominance of the middle- and low-end handset segment has been challenged by Chinese firms such as Huawei, Xiaomi and Lenovo.

Samsung plans to slash the number of smartphone models it issues in 2015, while boosting production of remaining models that can be sold more cheaply to compete with cut-price Chinese rivals.

A more fundamental restructuring is assumed to be in the pipeline, with control of the family-run conglomerate's main business expected to pass from ailing patriarch Lee Kun-Hee to only son Lee Jae-Yong.

Needing cash to pay for what will be a massive inheritance tax bill, Lee and his siblings are expected to pare down and simplify the byzantine system of cross-holdings that link the many branches of the Samsung empire.

The anticipated reforms have helped keep Samsung on the "buy" list of many analysts, despite the recent profit downturn.

Thursday's dividend increase came with Samsung under growing pressure to boost shareholder returns as its stock price has been battered by the recent series of quarterly profit falls.

The company is currently in the middle of a $2.0 billion share buyback process announced in November to appease disgruntled shareholders.

With a market capitalisation of about US$185 billion, Samsung accounts for nearly 17 per cent of the weighting on South Korea's benchmark Kospi composite index.