Samsung's net profit for 4th quarter tumbles 40%

The world's top handset maker continued to be squeezed at both ends of the lucrative smartphone market, with high-end competition from rival Apple matched by cheaper players like China's Huawei and Xiaomi.
The world's top handset maker continued to be squeezed at both ends of the lucrative smartphone market, with high-end competition from rival Apple matched by cheaper players like China's Huawei and Xiaomi.PHOTO: AGENCE FRANCE-PRESSE

SEOUL • Slowing global demand for smartphones and memory chips dealt a blow to Samsung Electronics as it reported a 40 per cent on-year drop in fourth-quarter net profit yesterday, a day after rival Apple recorded its weakest rise in iPhone sales.

The Korean conglomerate said the deteriorating global economy was eroding demand for computers and smartphones and depressing component prices. Samsung will invest in new screen and semiconductor technologies such as foldable displays to try and boost profit, executives said on a conference call.

The world's top handset maker continued to be squeezed at both ends of the lucrative smartphone market, with high-end competition from arch-rival Apple matched by cheaper players like China's Huawei and Xiaomi.

But Samsung was not alone, with Apple reporting earlier this week that sales of its popular iPhone rose slower than ever last quarter, raising questions about the future of the saturated smartphone market.

Samsung's net profit for October to December stood at 3.22 trillion won (S$3.9 billion), below analyst expectations and down 39.7 per cent from a year ago, the firm said in a statement. Operating profit rose 16.1 per cent on-year to 6.1 trillion won, in line with its earlier estimate.

In a statement, the South Korean giant said 2016 was expected to throw up continued challenges to maintaining earnings "due to a difficult business environment and slowing IT demand".

"All technology companies around the world will face a very tough industry ahead," said Mr Yoo Eui Hyung, an analyst at Dongbu Securities. "Until the overall demand picks up, it's a matter of how well they can hold out instead of how well they can battle out," he said.

Shares of Samsung finished 2.6 per cent lower in Seoul. The stock has fallen more than 9 per cent this year, compared with a 2.8 per cent decline in the benchmark Kospi index.

Samsung lost more than US$8 billion (S$11 billion) in market value last year, with its flagship smartphone business struggling to hold market share.

Sales of the Galaxy S6 - the latest edition of Samsung's top-of-the- range handset, launched last April - failed to generate much excitement among consumers.

Apple's woes have a knock-on effect for Samsung's semiconductor division which, as well as providing components for the company's own handsets, also makes the processors for a number of other companies - including Apple.

AGENCE FRANCE-PRESSE, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on January 29, 2016, with the headline 'Samsung's net profit for 4th quarter tumbles 40%'. Print Edition | Subscribe