The operating income of Korean smartphone maker Samsung is forecasted to dip by four per cent to US$8 billion in Q1 2014 compared to the same period last year.
On a quarterly basis, its operating income edged up by one per cent, while sales suffered a decline of 11 per cent over Q4 2013.
Samsung’s significant profit decline is attributed to the falling prices of smartphones, which accounts for over two-thirds of its income. In fact, the average price of its handsets is expected to decline this year to US$275, down nine per cent from 2013, according to Nomura Financial Investment analyst Chung Chang-won.
Another reason is that the growth of smartphone sales is cooling down in major markets such as Japan, Europe, South Korea and North America, while clients in emerging economies usually buy cheaper devices. In these markets, especially in Southeast Asia, the chaebol is facing stiffer competition from Chinese phone makers such as Xiaomi and Lenovo.
“In 2014, I expect that even more Chinese vendors will come in and they will put in greater investment in such emerging markets and they will pose a bigger threat” to Samsung, said IDC analyst Ryan Lai.
Nevertheless, Samsung sold the highest number of phones in China two months ago, while Lenovo and Apple were tied at second place, revealed a report by Counterpoint Technology Market Research.
The company’s bottom line is also expected to improve starting from Q2 2014, given that the latest model of its Galaxy S5 will go on sale across the globe on April 11. This phone is slightly cheaper than its previous version.