Visitors look at Samsung products at a fair in Berlin. Picture: REUTERS/TOBIAS SCHWARZ
AFP on Business Day Live
SEOUL — Samsung Electronics on Friday flagged a 15% increase in fourth quarter operating profit last year, rounding off a year in which the world’s largest smartphone producer struggled with fierce competition from archrival Apple and cut-price Chinese competitors.
In an earnings estimate, the South Korean tech giant predicted an operating profit of 6.1-trillion won ($5.1bn) for the October-December period, up from 5.4-trillion won a year earlier.
The figure was below the estimate of 6.64-trillion won given by analysts surveyed by Bloomberg News, and also marked a 7.5% drop from the previous quarter.
Samsung lost more than $8bn in market value in 2015, with its flagship smartphone business sandwiched by top-end rivals such as Apple’s iPhone and lower-end devices from fast-growing Chinese outfits such as Huawei and Xiaomi.
Sales of the Galaxy S6 — the latest edition of Samsung’s top-of-the-range handset, launched in April — failed to generate much excitement among consumers.
The company’s shares posted a third straight annual decline last year, dropping 5.1%. Sales were expected to be 53-trillion won in the fourth quarter, the company said, again slightly below analyst estimates.
Friday’s forecast, which comes ahead of audited results to be released this month, did not provide a net income figure or breakdown of divisional earnings.
Losses in Samsung’s mobile division have partially been mitigated by brisk business in chips and displays. That is because as well as providing the chips for the company’s own handsets, Samsung’s semiconductor unit also makes the processors for a number of other companies — including Apple.
"The profit from semiconductors and display panels offset the weak performances in smartphones and consumer electronics in 2015," HMC Investment Securities analyst Greg Noh said.
"But we are expecting a drop in the momentum for demand in all finished goods in 2016, and that will lead to a decrease in earnings in the parts sector," Mr Noh said.
After peaking at 10.1-trillion won in the third quarter of 2013, Samsung’s operating profit hit a bottom of 4.6-trillion won in the corresponding period of 2014 before climbing gradually.
As Samsung’s reliance on the chip-making business grew, the firm in May began building a new $14.3bn chip plant in Pyeongtaek, 65km south of Seoul.
This investment in the factory, which is to begin production in 2017, is the largest the firm has ever committed to a single plant.
Last month, Samsung replaced the head of its mobile business and promoted the chairman’s daughter in an effort to reassert its smartphone dominance amid a generational power transfer in the founding Lee family.
Samsung Group chairman Lee Kun-Hee has remained bedridden since suffering a stroke in 2014. The Lee family controls the vast conglomerate through a complex web of share cross-holdings in group subsidiaries.
Samsung’s share price rose in early trade as much as 1.1% after the announcement but then fell back to close the day at 1,171,000 won, up 0.69% from the previous day’s close.