Samsung Q2 Earnings Fall amid Faltering Galaxy S6 Sales
In July 2015, Korea’s largest manufacturer Samsung announced their estimated operating profit at $6.9 trillion won (USD$6.1 billion), which is lower than the expected $7.2 trillion but higher than the $6 trillion won during January through March. Profits are down by about 4% from the same time last year and sales declines nearly 8% to $48 trillion won, which was below the $52.8 trillion won forecast.
This marks Samsung’s seventh consecutive decline and with the release of the new Galaxy S6 during that time frame, analysts were quick to point the finger at Samsung’s flagship smartphone series. Samsung release two different versions of the phone, one with a flat screen that didn’t sell as well as expected, and one with a screen that had curved edges which ultimately proved to be hard to manufacture. Samsung could not keep up with the demand which contributed to the logistical part of the problem.
Tom Kang, research director at Counterpoint Research told CNBC in a statement: "Samsung's smartphone division is performing really poorly and its semiconductor business isn't outperforming because weak overall demand for handsets is limiting semiconductor demand."
Lee Ka-keun, an analyst at KB Securities, said that “the failure to manage the initial shipment for the Galaxy S6 series is the primary reason” for disappointing sales and that Samsung is bringing on a third plant to boost production.
However, the larger problem of Samsung competing in both the low and high end handset markets, is not so easily solved. On the low end, the company is getting undercut by various Chinese manufacturers that are able to survive on extremely thin profit margins while on the high end, Apple’s new iPhone 6 and 6 plus took over the large screen market that Samsung’s Galaxy once had control of. Last month, Samsung Securities lowered Galaxy S6 shipment estimates to 45 million units this year from 50 million the previous year. Full results for the second quarter are due later this month.
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