Home » Latest Technology » Samsung braces for its weakest year of smartphone growth since 2007

Samsung braces for its weakest year of smartphone growth since 2007

         
Samsung Electronics Co Ltd is bracing for its weakest smartphone revenue boom this year because 2007 as arch rival Apple Inc challenges its domination in China’s $eighty billion market.

Samsung’s mobile devices industry, which earns two thirds of the corporate’s revenue, will come beneath drive when Apple makes its phones on hand from January 17 by the use of China Cell Ltd, wherein Samsung has been promoting goodphones for round seven years.

Apple is also widely expected to sell smartphones with larger screens come autumn when it traditionally announces products, neutralising a selling point that Samsung has enjoyed since introducing its Galaxy Note in late 2011.

“Profit decline in mobiles will be inevitable, as the majority of growth will come from cheaper, low-margin phones, while competition at the high end will get only tougher with Apple’s iPhone deal in China,” said Shinhan Investment analyst Kim Young-chan.

Operating profit at Samsung’s mobile devices division is likely to grow by a low single digit or to shrink mildly in 2014, after increasing its size by eight times over the past five years, according to a Thomson Reuters’ Starmine SmartEstimate of 23 analysts, which gives greater weighting to the more accurate analysts.

“Its business was already hit in the fourth quarter by Apple’s strong iPhone sales, and the impact will continue at least until the end of the first quarter,” said Kim.

Samsung, the world’s biggest smartphone maker with a third of the market, will release October-December earnings guidance on Tuesday which will likely show operating profit growth of 10 percent at 9.75 trillion won, according to Starmine.

(Also see: Samsung quarterly smartphone shipments top 88 million: Research)

That would be 4 percent less than the record 10.2 trillion won of July-September as Apple enjoyed buoyant sales in the United States and Japan during the year-end holiday season.

Fourth-quarter earnings were also likely pulled down by a special bonus related to the 20th anniversary of the “New Management” strategy of Chairman Lee Kun-hee, which analyst estimates put at 300 billion to 700 billion won.

Apple competition
Samsung is the biggest smartphone vendor in China with sales reaching around 70 million units last year, or 20 percent of its total shipments, analysts estimate.

But Apple’s China Mobile incursion and possible larger screen offerings could cut sales of Samsung’s latest Galaxy S and Note series by 3 percent this year, BNP Paribas estimates. The iPhone is widely perceived in China as a gold standard for high-end products, analysts say.

(Also see: Apple inks China Mobile deal, gets 760 million new potential iPhone customers)

“We predict probably the most key causes Samsung has managed to take market share from Apple up to now is its massive-sized reveal choices,” BNP analyst Peter Yu mentioned in a observe.

“Then again, this hole is more likely to slender if Apple launches massive-display phones in 2014. Except Samsung additional differentiates itself with versatile OLED (natural gentle-emitting diode) displays, it will lose a few of these excessive-finish consumers.”

Shares tumble, Gained soars
Samsung shares were pummelled in latest weeks by way of 22 analysts downgrading fourth-quarter cash estimates over the last 30 days.

The shares, price $one hundred ninety billion, fell 10 % over the last fortnight to a four-month low final week, wiping off market worth to the tune of $19 billion – equal to the overall worth of shares of Sony Corp.

The received’s upward thrust to a 5-year excessive in opposition to the U.S. buck has additionally been prompting buyers to promote, as a powerful received reduces the worth of Samsung’s repatriated income.

A powerful received is especially difficult for Samsung’s elements trade, which generates round 30 p.c of general working revenue, as a result of it essentially settles money owed in greenbacks, analysts mentioned.

Samsung’s brightest spot is its semiconductor unit, which brings in 20 p.c of working revenue, and which enjoys increase estimates of round forty two p.c this year.

Total running revenue increase for 2014 is prone to be 6.2 %, the slowest percent in three years, consistent with Starmine.

© Thomson Reuters 2014