Samsung profit plummets on weak smartphone sales

Mirroring Apple, Samsung sees weak demand in 2016

Weak demand for mobile phones and display panels pushed down Samsung's profits last quarter, and the company doesn't expect much improvement this year.

Revenue for the fourth quarter was 53.3 trillion won ($US45.5 billion), up just 1 per cent from a year earlier, Samsung announced Thursday in Seoul. Net profit plummeted 40 per cent to 3.2 trillion won.

A day earlier, Samsung's biggest rival, Apple, said it too was seeing weaker than expected demand for handsets. The Cupertino company reported iPhone sales that were almost flat and forecast its first quarterly revenue drop since 2003.

Samsung isn't expecting much better. It sees a difficult environment in 2016 characterised by slowing IT demand.

"It would be a challenge to maintain 2016 operating profit levels," said Kim SangHyo, Samsung's vice president of investor relations, in a conference call with analysts.

A weak macro economy around the world will hurt business in the first half, but things should get better in the second half, the company said.

Sales in Samsung's key mobile division fell 10 per cent in the quarter to 24 trillion won. That was the result of an earlier pile up of unsold phones at retailers, and the fact that Samsung sold fewer high-end phones and more that were lower priced.

Samsung doesn't divulge the number of smartphones it sells, preferring to announce total sales of all phone types. That figure was 97 million last quarter, with smartphones accounting for around 85 per cent.

For 2016, it expects the mobile business will see single-digit growth due to tepid demand for new smartphones and tablet PCs.

Samsung's semiconductor and display panel operations - it's second-biggest business area - was the only good performer last quarter. Sales rose 11 per cent year-on-year to 19.7 trillion won thanks to healthy demand for flash memory chips and continued demand for mobile and server DRAM.

But the display business suffered due to weak demand for LCD panels. Samsung hopes stronger demand for OLED panels will help results in future.

The high-profile consumer electronics business saw sales drop 3 per cent to 13.8 trillion won, although profits jumped to 0.82 trillion won.

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Martyn Williams

IDG News Service
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