Samsung Electronics Sees Slowdown in Profit Growth

Samsung posted its slowest growth in quarterly profit in over one year Tuesday as the Galaxy S9 missed its sales targets while competition increased, casting doubt on the lead it holds in the global smartphone market.

The supplier of components for Apple Inc. and its biggest smartphone rival said that its operating profit from the mobile handset business posted its steepest decline rate since the 2017 first quarter. The drop was in part attributed to the less expensive handsets made in China that put pressure on its margins.

The tech giant based in South Korea gave its investor little reason that a quick turnaround would take place in its mobile business, citing stiffer competition during the second six months amidst worries its top line of premium phones do not have enough innovation to drive growth in sales.

Higher expenses in marketing and a poor performance of its S9 flagship smartphone, which came up short of sales targets, weighed on the performance of its mobile business said Samsung.

Samsung has pinned hopes on the foldable phones to be the next hot item. Its screen making unit announced last weeks that it bendable, unbreakable screen passed safety testing in the U.S., a key step in bringing the foldable phones to the marketplace.

The mobile business vice president said that the hope is the new foldable phone will be a catalyst to the current stagnated market for mobile handsets.

As for the short term, Samsung said that competition would be greater during the second six months of 2018, as new models of smartphones are released, prompting it to launch its new Galaxy Note at an earlier time than normal. The new Note will be launched in early August.

The mobile business booked a fall of 34% in its operating profit to just over $2.4 billion during its second quarter, the biggest decline since early last year when the Galaxy 7 was the flagship model.

Analysts expect Apple to report an increase in revenue as well as profit for its third quarter Tuesday, helped in part by the resilient sales of the iPhone lineup.

Huawei Technologies in China, the third largest maker of smartphones in the world, said earlier Tuesday that it experienced its slowest growth in sales for the first six months of 2018, since 2013.

The largest smartphone and chip maker in the world said operating profit increased 5.7% to $13.3 billion during the second quarter, which was slightly higher than expectations.

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