sciencetech-blog

comments

For the third consecutive quarter, Samsung's profits have taken a hit.

And the smartphone maker has reported its lowest quarterly earnings in three years, after profits plummeted by 60 per cent compared to this time last year.

Compared to a record-high of £6 billion ($9.5 billion) in 2013, the company achieved £2.5 billion ($3.8 billion) profits for July to September.

Scroll down for video 

Samsung (headquarters in Seoul pictured) has reported its lowest quarterly earnings in more than three years. Compared to a record-high of £6 billion ($9.5 billion) in 2013, the company achieved £2.5 billion ($3.8 billion) profits for July to September this year

These figures are in line with what Samsung predicted earlier this month, and the firm is blaming the drop on weak sales of its new Galaxy model.

The South Korean electronics giant became the biggest smartphone brand thanks to the popularity of earlier Galaxy models.

But the larger screen on Apple's new iPhone 6 has been linked with luring customers away from the larger Galaxy range. While in China, local brands are making inroads into Samsung's business.

In response to the dramatic drop, Samsung has vowed to revamp its smartphone range to win back customers.

Executives at the South Korean firm said it would overhaul its lower-tier line-up to boost price competitiveness, and use higher-quality components to set its devices apart.

'The mid-to-low end market is growing rapidly, and we plan to respond actively in order to capitalise on that growth,' said Samsung Senior Vice President Kim Hyun-joon during a conference call with analysts.

In a rare acknowledgement, the company's head of investor relations added that Samsung had lagged behind changing market conditions. 

The company's response 'was not quick enough,' said Robert Yi.

It plans a significant change in smartphone strategy for next year to seek more 'efficiency,' suggesting that the number of new handsets might be reduced.

This would allow the company to focus more on each product. 

The earnings are below the median of analysts' expectations of £3 billion ($4.9 billion), according to FactSet, a financial data provider.

The decline in Galaxy sales has also hurt demand for Samsung components such as an advanced display called OLED.

'The operating margin declined due to increased marketing expenditure and lowered average selling price,' Samsung said. 

The company said it 'cautiously expects increased shipments of new smartphones and strong seasonal demand for TV products'. 

Analysts claim the bigger iPhones released last month (shown) will likely take away customers who favoured the Galaxy's larger screens. In emerging markets, such as India and China, Samsung's smartphone sales have been overtaken by local rivals

The latest news comes despite the launch of the Samsung Galaxy S5 (pictured) earlier this year, which was received by mostly rave reviews. The Galaxy S5 handpicked features from its competitors and put them all into a single handset, with some calling it a 'superphone'

In emerging markets, such as India and China, Samsung's smartphone sales were overtaken by local rivals. 

'Rather than seeking stability, Samsung should seek to distinguish [its phones] with Galaxy's design policies,' Lee Seung-woo, an analyst at IBK Securities said.  

The company moved the launch of the Galaxy Note 4, a large smartphone with a stylus, to late September from October after Apple unveiled the iPhone 6 and 6 Plus. 

It also began sales of the Galaxy Note 4 in China last month, getting an early start in the world's most populous country before Apple. 

Samsung unveils Galaxy Note Edge with a curved side (archive)

Last month, Samsung also received upbeat initial responses to its Galaxy Note Edge smartphone (shown), a smartphone with a curved side screen that can display weather, news, apps and other information. But the supply volume for the Edge smartphone will be limited, not giving a big boost to its earnings, analysts said

Last month, Samsung also received upbeat initial responses to its Galaxy Note Edge smartphone, a smartphone with a curved side screen that can display weather, news, apps and other information.

But the supply volume for the Edge smartphone will be limited, likely not giving a big boost to its earnings, analysts added.

With growth momentum in smartphones sagging, Samsung is moving to step up its presence in the semiconductor business.

This week, Samsung announced a £9 billion ($15 billion) investment plan to build a new semi-conductor fabrication plant in the South Korean city of Pyeongtaek.

The construction will begin before the summer next year and begin operations during the second half of 2017.