Jung Ha-Won Seoul
BUFFETED by sliding profits and emboldened competitors, mighty Samsung Electronics is looking unusually vulnerable, but analysts say its financial muscle and product diversity make “crisis” talk premature.
The South Korean behemoth, which is also facing a once-in-a-generation leadership change, reported a near 50 percent plunge in third-quarter net profit last Thursday, following a 20 percent drop in the previous quarter.
The nosedive was dramatic because it came after years of stellar growth and a seemingly endless succession of record quarterly profits for the world’s largest smartphone maker.
Just as it had driven the rapid profit expansion, it was the performance of its mobile unit that accounted for the sudden reversal in fortunes.
While its flagship Galaxy S smartphone suffers in the high-end market from the popularity of arch-rival Apple’s new iPhone 6, its dominance of the middle- and low-end handset segment is challenged by Chinese makers such as Huawei, Xiaomi and Lenovo.
“Suddenly, Samsung finds itself sandwiched between Apple and the Chinese makers,” said Lee Min-Hee, an analyst at IM Investment and Securities.
For the moment, Samsung is still the comfortable leader by sales volume, but its share of the global smartphone market has fallen from 35 percent a year ago to under 25 percent, according to Strategy Analytics.
The star performer in the third quarter was Xiaomi, which took the number three spot behind Apple with a near 6 percent market share.
Mainland China is the world’s largest smartphone market, and Xiaomi’s cheap, feature-packed handsets had ousted Samsung as the top seller there in the second quarter.
On Thursday, Samsung executives promised to “fundamentally reform” the handset product portfolio for every tier, with a focus on the low-end segment.
A more fundamental restructuring is assumed to be in the pipeline, with control of the family-run conglomerate’s main business expected to pass from ailing patriarch Lee Kun-hee to only son Lee Jae-yoon.
Needing cash to pay a massive inheritance tax bill, Lee and his siblings are expected to pare down and simplify the byzantine system of cross-holdings that link the branches of the empire. – Sapa-AFP