Samsung prepares lower-end phones as Q1 operating profit falls

Samsung is preparing more lower-end phones for emerging markets

Samsung Electronics posted a dip in its operating profit for the first quarter, falling by 3.3 per cent year-over-year as the company faces growing competition in the smartphone market.

During the period, the company's operating profit reached 8.49 trillion Korean won ($8.2 billion). It marked the second consecutive quarter the operating profit has fallen.

Samsung's net profit, however, grew year-over-year by 5.9 per cent to 7.6 trillion won. The company's sales were also slightly up, reaching 53.7 trillion won, up 1.5 per cent from a year ago.

The South Korean electronics maker has been posting weaker earnings, after previously reporting profits in the double digits on surging smartphone sales. While the company's handsets still remain popular across the world, consumers are increasingly buying less pricier smartphones, especially in markets such as China.

However, Samsung said it continues to see "solid sales" for its higher-end phones the Galaxy S4 and the Note 3. The company also expects to see a boost in it earnings next quarter, with the launch this month of its newest flagship phone, the Galaxy S5.

Samsung projects that sales of the S5 will surpass the S4, which sold more than 10 million units in the first month after its launch last year. The company's mobile devices business makes up over half of its revenue.

For emerging markets, the company is developing more lower-end phones that will come with larger screens, and slots to carry two SIM cards, company executives said in an earnings call. Samsung also wants to incorporate the user interface features found its flagship phones into its existing mid-range handsets.

"There's continued growth in the $US100 dollar below market in smartphones," said Hyunjoon Kim, senior vice-president for Samsung's mobile communication business. "We will be adding new products to that price segment as well."

In this year's second quarter, the company's earnings will see an additional boost from better sales of its display panels and home appliances, Samsung said. Orders for its displays in high-end smartphones are increasing, and more TVs will be bought during the run-up to the World Cup in Brazil, the company added.

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