In the face of global economic challenges, market saturation, and a sharp decline in oil prices, Samsung's fourth-quarter net profit fell by 40%, signaling a difficult period for the tech giant. Following Apple CEO Tim Cook's warning about an upcoming "winter" for the tech industry, Samsung Mobile President Lee Kyeong-tae echoed similar concerns, suggesting that the company is entering a tough phase this year.
According to Samsung’s quarterly earnings report released on Thursday, the company’s net profit dropped by 39% to 3.24 trillion won ($2.7 billion), well below the expected 5.4 trillion won from Bloomberg analysts. This decline was largely driven by non-operating losses of 2.5 trillion won, attributed to falling prices, a strong South Korean won, and weak sales growth in smartphones and memory chips.
Samsung acknowledged in its statement that the mobile phone industry is slowing down, and demand for IT products has decreased, leading to more intense competition. The company has lost pricing power in the memory chip market, which is now oversupplied, causing a sharp drop in chip prices. As a result, Samsung's memory chip sales in the fourth quarter generated only half the profit compared to the third quarter.
To weather the industry's "cold winter," Samsung plans to boost performance through cost-cutting and diversification. Key areas of focus include foldable displays and next-generation semiconductor technologies. Lee Kyeong-tae, head of Samsung's mobile communications division, noted that while smartphone competition remains fierce, there is potential for growth in the low-end market. To capitalize on this, Samsung will introduce new affordable devices to strengthen its competitive edge.
Analysts suggest that global smartphone shipments grew by just 6% in Q4 2015, marking a record low. With pressure from competitors like Apple, Xiaomi, and Huawei, Samsung's smartphone sales declined for the second consecutive year. According to Lee Ka-keun, an analyst at KB Investment Securities, Samsung's future performance is likely to remain under pressure.
Peng Bo cited East Securities analyst Yoo Eui Hyung, who warned that all major tech companies are heading into a "severe winter" this year. Unless overall demand improves, these firms should focus on self-protection rather than competing with rivals. With mobile phone demand stagnant, the performance of big tech companies now hinges largely on memory chip and display sales.
Wall Street reported that Apple posted its first-quarter earnings after market close, achieving record highs in revenue and net profit. However, iPhone profit growth hit a historic low. CEO Tim Cook attributed the slowdown to global economic volatility, including a stronger U.S. dollar, slower economic growth in various regions, falling commodity prices, and ongoing currency depreciation.
As both Apple and Samsung struggled, stock prices for related companies like TDK Mobile Communications, Murata Manufacturing, and LG also declined. So far this year, Samsung’s share price has dropped over 9%, while the Seoul KLCI index has fallen just 3.2%. Samsung shares fell further by 2.6% in early trading today.
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