For the first time in two years the Korean giant Samsung has posted its first quarterly profit decline according to Bloomberg. So just what caused this dip in profits? Reportedly it had to do with special employee bonuses and a slowing of handset sales.
The reason why there is no solid answer is because Samsung does not announce the number of handsets it sold in the quarter, leaving that figure in the hands of analysts. The firm Daewoo Securities estimates that Samsung solid 9 million Galaxy S4s and that sales of its flagship handset have slowed due to competition.
There is also more demand for entry level smartphones, and although the marketing is growing sales of phones in the low-end market won’t bring in significant revenue as profit margins on these inexpensive handsets are slim.
Earnings will remain stagnant this year as the explosive growth of the past two to three years seems to have ended,” said Lee Sun Tae, a Seoul-based analyst at NH Investment & Securities Co. “Although the lower-end smartphone market will continue to grow, the scale of profit from that segment doesn’t compare to the high-end market so the growth seems limited.
It wasn’t just smartphones that came into play for the profit decline, but also a decrease in television set sales. The bottom line is Samsung is seeing increased competition, especially with Apple entering emerging markets like China, which is starting to take its toll.