There are signs that the rise of electronic’s giant Samsung is losing its impetus after it issued unexpectedly weak quarterly earnings guidance.
It is looking as like the outfit is headed for its worst results in two years and that its plans to deal with cheaper Chinese rivals are not working.
The South Korean company said it saw better business conditions in the third quarter, butit faces slowing market growth, intensifying price competition from the cheap and cheerful market.
While smartphones drove Samsung to record profits last year, the market is maturing. Research firm IDC predicts global shipments growth will slow to 19.3 percent this year from 39.2 percent in 2013, while average sales prices will also drop.
Some analysts said Samsung may have no choice but to slash prices for mid-to-low tier devices, where growth is stronger, and target Huawei and Lenovo.
That will help defend market share it would also hurt margins, curbing its earnings recovery in the short term.
Samsung said that it cautiously expects a better third-quarter outlook with the release of a new smartphone lineup, lower marketing costs and a seasonal lift in demand for its memory business. Its flagship Galaxy Note 4 is expected to hit the market in September.
Samsung estimated on Tuesday that its April-June operating profit likely fell 24.5 percent from a year earlier to $7.12 billion, the sharpest percentage drop since the first quarter of 2011 and the weakest level since the second quarter of 2012.
In a separate statement, Samsung said second-quarter earnings would be hit by slower global smartphone market growth, competition in China, inventory buildup in Europe and the strength of the won.
