Samsung profit plunge leads to diversification
South Korean company rolling out new products to deal with decline in smartphone sales
SEOUL — Samsung Electronics’ 60 per cent plunge in profit as its smartphone business stagnates may accelerate the South Korean company’s push into wearable devices and home appliances that communicate with each other wirelessly.
Operating profit fell to $ 4.1 billion in the three months ended September from a record $ 10 billion a year earlier, the company said in a regulatory filing. Sales fell about 20 per cent as the biggest smartphone maker ceded share in China and India to local rivals.
Samsung is rolling out new products to stave off gains by Apple with larger- screen devices, an area the Galaxy maker has dominated, and by Xiaomi and Lenovo Group with feature-packed phones selling for lower prices. Samsung will spend $ 15.6 billion building a semiconductor plant in South Korea to meet demand for the brains that run smartwatches, fitness monitors, automobiles and refrigerators.
“Samsung should really push beyond smartphones because we can no longer expect significant growth from the business,” said Yoo Eui- Hyung, an analyst with Dongbu Securities in Seoul. “It’s time for Samsung to act more aggressively in seeking future growth areas, including more lucrative semiconductors and more web- controlled applications such as smart cars and smart homes.”
Construction of the new plant in Gyeonggi province, south of Seoul, will begin in the first half of next year, with operations due to commence in 2017. In August, Samsung said it was acquiring SmartThings, a start- up that make mobile applications to control devices in houses.
Shares of Samsung rose one per in Seoul trading Tuesday, paring this year’s decline to 15 per cent. Analysts expect fourth- quarter earnings to improve as Samsung benefits from sales of its new Galaxy Note 4 and Galaxy Edge devices during the Christmas season.
Samsung is preparing smartphones that feature new materials and innovative designs, Samsung said in an emailed statement. The company also is developing more mid- to low- end devices to help it compete.
“The market thinks this is the worst profit they can expect from its mobile business, it won’t go any lower from here as more product lineups are expected throughout this year into next year,” said Claire Kim, a Seoulbased analyst at Daishin Securities.
The drop in quarterly profit was the company’s biggest since 2009.