Seoul – A slump in the sales of smartphones has led to almost 40% fall in the net profit of Samsung Electronics’ first quarter earnings restricting it to $5.7 billion. Although the analysts had speculated escalation in the memory chip demand, it could not stop the drop in the earnings of Samsung. However, the operating cost of the South Korea’s No. 1 electronic giant was up by 13.1%.
To make the matter worse for the company, LG Electronics Inc, its closest rival is all set to come up with a new flagship G4 smartphone in a few days. The No. 2 tech giant from South Korea, LG is aiming to take on the iPhone and Galaxy S6 series of Apple and Samsung lineup, respectively and widen the competition in the already saturated smartphone segment.
The increased competition from smaller Chinese handset manufacturers and Apple has already put the brakes on the increasing popularity of Samsung electronic products. However, the earning of Samsung was quite low as compared to Apple, which showed a 33% increase in its net profit moving on to $13.6 in its first quarter. The main reason for this rise in profit is the blockbuster sale of iPhone 6, especially in China, which is a big smartphone market.
According to the market skeptics, although Samsung has managed to cut down its mobile margins, the profit level will have to face another test level when the Galaxy smartphones will reach the market.
These flagship smartphones from Samsung are one of the costliest ever made by the company and respond to them in the market can have a dwindling or an elevating effect on Samsung’s profit margin.
The company accounted for around 60% of the total last year’s profit in the last year’s first quarter taking the operating margin to 10.6%. According to analysts, the rise in this profit is owing to the introduction of revamping smartphone handset designs, especially in its key markets such as India and other subcontinent countries.