Samsung Forecasts Tough Year Ahead As Smartphone Sales Dip

Samsung Electronics’ fourth-quarter profit missed expectations by a wide margin Thursday as global demand for smartphones dropped. The South Korean tech giant also warned that a recovery in sales would be slow amid intensifying competition and weakening global demand for consumer electronics.

Samsung, the world’s largest smartphone maker by volume, said Thursday it would be difficult to maintain 2016 profits at levels seen in previous years as slowing economic growth in China and uncertain emerging markets chipped away at sales of its electronics and chip making business.

“Samsung expects single-digit percentage growth in both the smartphone and tablet categories amid softening demand and intensifying competition,” the Seoul-based company said in a press release. Just a day before, rival Apple’s shares fell more than 6.5 percent after the iPhone maker predicted its first quarterly sales drop in 13 years.

On the earnings front, net profit for the fourth quarter plunged 40 percent from a year earlier to 3.2 trillion won ($2.7 billion), missing analysts’ expectations of a net profit of 5.1 trillion won ($4.22 billion), Associated Press reported.

Samsung's sales edged up by 1.1 percent to 53.3 trillion won ($44.14 billion), in line with an earlier 53 trillion won ($43.89 billion) guidance set by the company. The company’s mobile division reported its weakest quarter in four years, down 7.3 percent from the third quarter to 2.23 trillion won ($1.85 billion). Samsung said first-quarter mobile profits would improve slightly, boosted by the launch of new smartphones, although overall smartphone shipments were expected to decline slightly.

In addition to slowing mobile shipments, the maker of Galaxy smartphones and tablets faced a sequential slowdown in its semiconductor business in the fourth quarter, which had previously helped offset declining profits from the mobile division since mid-2014.

The company said it expected business condition to improve toward the second half of the year. Samsung shares were down 2.55 percent as of 1:02 a.m. EST on the Korea Exchange.