Samsung Electronics Q2 Profits Hit By Competition From Mid- And Low-End Smartphone Manufacturers

Samsung Electronics (KRX:005935) turned in a lackluster quarter as competiton from mid- and low-end smarphone manfacturers hurt sales of the Galaxy s5, and tablet sales suffered from weaker global demand.

Net income in the second quarter dropped 20 percent to 6.25 trillion won ($6.1 billion), compared to 7.77 trillion won in the same quarter last year. This figure missed analysts’ income expectations which they pegged at 6.5 trillion won ($7.5 billion), according to the Associated Press.

Despite the release of the Galaxy S5 in April, Samsung struggled in the smartphone market in Q2 due to increased competition in the mid to low end smartphone market, a growing segment currently being eyed by other competitors such as Microsoft Corp. (NASDAQ:MSFT).

Sales of Samsung’s line of Galaxy Tab tablets suffered due to weak market demand, according Robert M. Yi, Samsung senior vice president of investor relations.

On the semiconductor manufacturing side, weak customer demand contributed to lower sales, but it expects demand mobile demand from China to aid in a rebound.

A stronger Korean currency was also blamed as the Won continued to make gains against the U.S. dollar and other foreign currencies.

Samsung has been able to maintain its growth in recent years through its mobile phone division. But the tech giant expressed concerns about future profitability in Q3 due to the slowing smartphone market growth along with growing competition.

“Prospects for growth remain unclear as competition over global market share intensifies in the mobile industry,” Samsung said according to BBC. "Samsung expects to see its sales of mobile devices increase with the rollout of flagship products and new models, but profitability may suffer due to a heated race over price and product specifications.”

In addition to competition from the mid to low end smartphone market, Samsung also faces competition from Apple (NASDAQ:AAPL) with the highly rumored fall launch of the iPhone 6.