Samsung reports largest profit decline since 2011
Thu 8 Jan 2015
Competition from a strong smartphone market has pushed Samsung’s annual revenue down for the first time in three years.
The South Korean firm confirmed today (paywalled) that it has seen its operating profit fall by 32 per cent, down to $22.6bn (£15bn). Operating profit was measured at Won5.2tn (£3.1tn) in the final quarter of 2014, dropping from Won8.3tn a year earlier but beating the predicted Won5tn.
Industry analysts had predicted a greater fall of 37 per cent for the fourth quarter, however strong sales for Samsung’s memory chips within its semiconductor division was able to salvage profit lost by its slowing smartphone business.
In both 2012 and 2013 Samsung led the smartphone market with its Galaxy release, pipping Apple, Nokia and Motorola in terms of sales. However, over 2014 this growth halted due to disappointing models and market pressure on its low and mid-end phones from Chinese smartphone makers such as Xiaomi, which beat Samsung in both the Chinese and Indian markets. At the top end of the market, Samsung also came under threat from Apple’s iPhone 6.
In response to its falling quarterly sales (down 12 percent), Samsung has said that it will reduce the number of smartphone models it produces to lower costs. The firm has also said it will be on the lookout for new innovative streams of revenue, particularly claiming a focus on the Internet of Things (IoT) to lessen its reliance on smartphones. The company has promised that by 2017 all of its TVs will be connected to the internet, and that over the course of the next five years all of its hardware would be IoT-ready.
The internet-connected televisions will run on Tizen, its own operating system, designed to rival Google’s Android software.
Samsung is expected to release its financial results later this month, as well as a breakdown of its annual performance.