Samsung Electronics braces for weakest year of smartphone growth

Mon Jan 6, 2014 4:28pm EST
 
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By Miyoung Kim

SEOUL (Reuters) - Samsung Electronics Co Ltd is bracing for its weakest smartphone profit growth this year since 2007 as arch rival Apple Inc challenges its domination in China's $80 billion market.

Samsung's mobile devices business, which earns two thirds of the company's profit, will come under pressure when Apple makes its phones available from January 17 via China Mobile Ltd, through which Samsung has been selling smartphones for around seven years.

Apple is also widely expected to sell smartphones with larger screens come autumn when it traditionally announces products, neutralizing 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 ($9.24 billion), according to Starmine.

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.   Continued...

 
Samsung Electronics' Galaxy S4 (L) and Apple's iPhone 5 are seen in this file picture illustration taken in Seoul on May 13, 2013. REUTERS/Kim Hong-Ji/Files