Samsung posts 48.8% drop in Q3 net profit

A Samsung Electronics flag (L) flutters outside its headquarters in Seoul. (AFP/Jung Yeon-Je)

SEOUL: Samsung reported Thursday (Oct 30) a near 50 per cent fall in third quarter net profit, as its key smartphone business faltered amid growing competition from Chinese firms in the increasingly saturated market.

Net profit for the South Korean electronics giant amounted to 4.22 trillion won (US$4 billion) for July to September - the lowest such figure in nearly three years. Operating profit also dropped 60 per cent from a year ago to 4.06 trillion won, slightly less than its earlier forecast of 4.1 trillion won. Sales also tumbled about 20 per cent to 47.4 trillion won, Samsung said in a statement.

"Despite a marginal increase in sales volume, the (mobile unit) saw earnings fall for two consecutive quarters, as smartphone average selling price declined due to reduced prices for older models and increased sales of middle-end smartphones," it said.

The firm's smartphone unit reported operating profit of 1.75 trillion won in the third quarter, a dramatic decline from 6.7 trillion won a year ago. Sales also tumbled to 24.6 trillion won from 36.6 trillion won.

Samsung - the world's largest manufacturer of smartphones and TVs - earlier reported a 20 per cent drop in its second-quarter net profits as its handset business faced slowing demand in lucrative advanced markets and intensifying competition from cheap Chinese device makers.

The company has a diverse product line ranging from memory chips to home appliances, but more than half its sales are generated by mobile devices. Samsung however saw the latest edition of its all-conquering Galaxy S smartphone met with lukewarm response since its launch in April.

It was also forced to introduce the new edition of the oversized smartphone Galaxy Note earlier than scheduled in September as the latest iPhone6 from the US rival Apple enjoyed better-than-expected demand. Samsung initially pioneered the market for the "phablet" devices - sized between a smartphone and a tablet computer - when it introduced the Galaxy Note series in 2011.

But the firm has come under pressure with the release of the iPhone 6, which introduced the popular larger-screen version similar to Galaxy Note. In the low- to mid-range smartphone segment, Samsung has met with a growing challenge from Chinese firms like Huawei nipping at its heels in key emerging markets including China.

Samsung voiced optimism Thursday over the sales of Galaxy Note 4 and new middle-end smartphones, but it cautioned "market competition is expected to further intensify."

"Although (Samsung) anticipates a demand growth for the recently launched Galaxy Note 4 and new middle-end smartphone models, uncertainty remains for the IM Division, due to the year-end surge in competitor smartphone launches, which may require a potential increase in marketing expenses associated with year-end promotions," it said.