Samsung warns of tough 2016 after 4Q profit sinks

Samsung Electronics reported Thursday a bigger-than-expected decline in fourth quarter earnings as its mainstay smartphone and semiconductor businesses suffered from weakening global demand for consumer electronics, according to AP. The South Korean company also warned a recovery in profit is unlikely during the first half of this year due to a tough business environment Samsung's net profit for the October-December period plunged 40 percent from a year earlier to 3.2 trillion won ($2.7 billion). The result fell short of expectations, even after considering the negative impact from foreign currency exchange rates estimated at 400 billion won. A survey of analysts by financial data provider FactSet forecast net profit of 5.1 trillion won. Sales edged up 1 percent to 53.3 trillion won for the quarter. Operating income rose 16 percent to 6.1 trillion won, in line with Samsung's earnings preview earlier this month.

The latest results reflect additional challenges for Samsung as its semiconductor business, which helped offset declining earnings from smartphones since mid-2014, joined the mobile division in a profit slowdown. Weakening global demand for smartphones and other consumer electronics products is taking a toll on Samsung's sales of mobile components to companies such as Apple, as well as sales of Samsung's own mobile devices. The company is the world's largest maker of memory chips that are used in PCs and mobile devices. It is also the world's largest maker of smartphones and television sets.

For the full year, it earned 19.1 trillion won ($15.8 billion), down 19 percent from the previous year and the lowest level in four years. It was the second year in a row with a decline in annual net income after the company's earnings peaked at 30.5 trillion won in 2013. During the final quarter of 2015, the semiconductor business reported its first quarter-over-quarter profit decline in more than one year. It logged 2.8 trillion won in operating income, about 25 percent lower than the previous quarter but slightly higher than a year earlier. In addition to the softer global demand for mobile devices and PCs, an oversupply of memory chips that pushed down prices also drove the weaker-than-expected profit growth.

The mobile phone business posted its second straight quarterly profit decline with 2.2 trillion won in operating income. Even though Samsung rolled out its high-end smartphones sooner than usual, including the Galaxy Edge series with curved displays, they failed to increase premium smartphone shipments as consumers flocked to cheaper smartphones. Samsung is not the only smartphone maker struggling to increase sales of premium smartphones. Apple, which reported earnings earlier this week, forecast its first year-over-year sales decline in 13 years. The maker of Galaxy smartphones will likely not see a revival in its profit anytime soon.

Meanwhile more than 1.4 billion smartphones were shipped worldwide last year in a new high for the sector with Chinese handset makers racking up the biggest gains, an industry tracker said yesterday according to AFP. Global smartphone shipments for 2015 jumped slightly more than 10 percent to an unprecedented 1.43 billion, said International Data Corporation (IDC), releasing its preliminary figures. Samsung remained the top smartphone maker, shipping 85.6 million units in the final quarter and 324.8 million for the year, according to the IDC's Worldwide Quarterly Mobile Phone Tracker report. Second-place Apple shipped a record-setting 74.8 million iPhones in the quarter and were up slightly more than 20 percent to 231.5 million units for the year, said IDC, a day after Apple warned that iPhone sales are set to fall for the first time. Huawei shipped 32.4 million smartphones in the final quarter of 2015, pushing its total for the year to 106.6 million.