SEOUL, Oct. 24 (Xinhua) -- LG Electronics, the world's third- largest smarpthone maker, said Thursday that its third-quarter operating profit dropped compared with three months earlier due to higher marketing costs and lower product prices amid fiercer competition.
Operating profit was 217.8 billion won (207 million U.S. dollars) during the July-September period, up 27 percent from the same period last year, the company said in a statement.
The figure, however, was sharply down 54.6 percent from the prior quarter due to higher marketing costs and lower selling prices amid intensifying competition with rivals.
Sales increased 4.6 percent on-year to 13.9 trillion won in the third quarter, but it was down 8.8 percent from three months before. Net income dropped 34 percent from a year earlier to 108.5 billion won in the cited period.
The tech firm shipped a total of 12 million smartphones in the third quarter, up 71 percent from a year earlier and almost the same as the prior quarter's 12.1 million units. Smartphone sales accounted for 66 percent of LG's combined handset sales during the quarter.
According to the market researcher Strategy Analytics, LG Electronics ranked third in the second quarter, with a market share of 5.2 percent in global smartphone sales.
Despite the high share of smartphone sales, the company's Mobile Communications division that makes handsets recorded an operating loss of 79.7 billion won in the third quarter on revenue of 3.05 trillion won.
The launch of new flagship smartphone LG G2 raised initial marketing expenses in the quarter, and lower average selling prices caused by fierce competition weakened the division's profitability, the company said.
Optimism remained over LG's smartphone business due to the expected easing of market competition and higher market share.
"We expect LG's smartphone profitability to recover in 2014 on the back of costs cuts that will come from easing of market competition. Shipment will steadily grow as LG is easing into the market shares of Nokia, HTC and Blackberry," said Cho jinho, an analyst at Mirae Asset Securities in Seoul.
The Home Entertainment unit that manufactures TVs posted an operating profit of 124.4 billion won on revenue of 5.01 trillion won, down 7 percent from a year earlier.
The third-quarter fall was attributable to discontinued TV subsidies in China, weakening TV demand amid global economic slowdown and intensifying price competition in the low-end TV segment.
The company, however, noted that global sales of premium products such as OLED TVs and Ultra HD TVs would expand in the upcoming quarter as it enters the holiday selling season.
The Home Appliance business that produces fridges and washing machines posted revenues of 2.97 trillion won in the third quarter, up 3 percent from a year earlier, due to solid demand for its new models in North America and China.
The Air Conditioning and Energy Solution (AE) business reported 973 billion won in revenue for the third quarter. The increased R& D investment and weak global market conditions will continue to impact the business, LG said.