Samsung Reports Lowest Quarterly Profit And Potentially Weakest Year Since 2011

A drop in smartphone earnings has hauled down profit for Samsung Electronics Co. Ltd for what could be its worst year since 2011. The world’s largest smartphone maker saw its July-September quarterly profit plunge to the lowest level in more than three years, according to several news reports. In its earnings statement Thursday, Samsung said the outlook of its mobile unit remains uncertain.

According to the Wall Street Journal, the company’s smartphone business has continued to lose traction to low-cost Chinese smartphone makers, despite the launch of new gadgets like the Galaxy Note 4 phablet. The South Korean–based company reported its third-quarter operating profit fell by an annual 60.1 percent to 4.1 trillion won ($3.90 billion), the lowest since 2011. Samsung has lost market share in annual terms for the past two quarters and the company will likely have to sacrifice margins to ensure it does not lose further market share, Reuters reported Wednesday.

Profit for Samsung’s mobile unit fell to 1.75 trillion won in the third quarter from 6.70 trillion won last year. Analysts estimate Samsung shipped between 78 and 81 million smartphones during the quarter ended Sept. 30, which is a drop from the 88.4 million devices shipped during the same period last year, according to Strategy Analytics. In contrast, LG Electronics shipped a record 16.8 million smartphones during the third quarter, proving momentum from smartphone sales continues for this manufacturer. Analysts predict Samsung’s record mobile profit days are over, according to Reuters.

Keeping up with low-cost Chinese brands will remain a challenge amid heightened price competition. A growing wave of cheaper phones and Chinese players is expected to drive global smartphone market growth, setting the trend of lower average selling prices, according to Reuters. Newly successful Chinese phone maker Xiamoi Inc. recently surpassed Samsung in China as the largest smartphone maker in the country, the Wall Street Journal reported Wednesday.

“Samsung will actively expand its business in China in accordance with the government’s policies and hope to be a loved company within China that makes contributions to its society,” said Samsung Vice Chairman Jay Y. Lee in a statement Wednesday afternoon.