After missing analysts’ estimates in second quarter profits, Samsung Electronics Co. has forecast a recovery in sales during the third quarter of this year.
The world's biggest smartphone maker announced on Monday the demand for new products and displays, which will boost third-quarter profits. The news comes amid a 7.2 trillion won ($7.1 billion) operating income fall during the second quarter - this translates to about a 24 percent loss. The slump - the third straight quarterly drop for Samsung - was attributed to Chinese competition and gains in the Korean won.
"Samsung earnings will rebound in the third quarter, largely driven by explosive demand for 4G smartphones in China. If Samsung can maintain at least 20 percent market share in that segment, it will see higher smartphone sales during the quarter when the significant impact from Apple's new devices isn't yet expected," Claire Kim, a Seoul-based analyst at Daishin Securities Co, told Businessweek.
Samsung emailed Businessweek explaining the loss and the positive forecast: "The second quarter is a seasonally weak period for smartphone demand in China. The company cautiously expects a more positive outlook in the third quarter with the coming release of its new smartphone lineup."
The operating profit for Samsung's telecommunications unit, which was responsible for more than 70 percent of its earnings, fell to about 5.1 trillion won from the record 6.7 trillion won in the third quarter of 2013. According to IBK Securities Co.'s assessment, smartphone shipments slid to 78 million units from the 87.5 million shipped during this year's first quarter.
"Samsung is struggling to differentiate its products from cheaper devices offered by Chinese rivals," M.S. Hwang, an analyst at Samsung Securities, told Businessweek.
According to Reuters, the competition became intense with other Chinese rivals, such as Huawei Technologies Co. Ltd and ZTE Corp. These smartphone makers are starting to become popular in the mid-to-low end market. HMC Investment Securities analyst Nho Geun-Chang also said Samsung might have spent too much money promoting the Galaxy S4.
