BEIJING, Oct. 8 (Xinhuanet) -- After an soft second quarter, Samsung is saying profits could slump as much as 60 percent in Q3. The South Korean tech giant is getting pincered by lower cost smartphones from China and new iPhones from Apple.
Apple used to be the only firm to inspire vivid nightmares and cold sweats for senior executives at Samsung Electronics. But these days, it’s also Huawei, and Lenovo, and ZTE, and of course Xiaomi which has ascended from bit player in China last year, to number one last quarter, a spectacular rise that’s caught almost everyone by surprise.
This increase in lower-price Chinese smartphone competition is in part why Samsung’s earnings are looking so dismal this quarter.The average analyst forecast was for an already painful 45 percent drop year-on-year.
Instead, Samsung now predicts it will plummet by nearly 60 percent to 4.1 trillion won or 3.8 billion U.S. dollars, which would be its weakest quarter since mid-2011.
While today investors bet on the firm bottoming out, the mid-term charts reveal the company’s share price has sunk to two-year lows.
More pain may follow on the high end as well, with Apple’s newly enlarged iPhone now threatening to further erode sales of Samsung’s flagship offerings, like the Note 4 and the Galaxy S5.
On the bright side Samsung’s chip business continues to improve as demand rises. Also next quarter, the semiconductor unit will get an extra helping hand - ironically from Apple - which is expected to buy boatloads of Samsung components to put inside those new iPhones.
As a result, Samsung is plowing more cash into the segment, revealing plans to invest about 15 billion dollars in a chip production plant in South Korea earlier this week.
A potential renaissance for Samsung’s chip business could help offset this brutal change of fortune for the firm’s mobile unit, but that will take time. And if mobile does not show signs of recovery soon, many investors who initially bought shares in what they saw as a smartphone company may reconsider their position all together.
(Source: CNTV.cn)
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