Samsung Warns of 60% Fall in Profit

Samsung says that it expects third quarter operating profit to be approximately KRW4.1 trillion ($3.8 billion), 60% lower than Q3 of last year and the fourth consecutive quarter of declines. Revenue for the period is also forecast to be lower than expected at approximately KRW47 trillion ($43.7 billion), which is 10.2% down from the previous quarter and 20.4% down from a year ago.

The company said that its weaker Q3 outlook was the result of declines in its mobile business due to intensified smartphone competition, which also had an adverse effect on the performance of the OLED and S.LSI businesses, as well as weak seasonal demand for the CE business, including TVs. While smartphone shipments increased marginally, the operating margin declined due to marketing expenses related to aggressive promotions and lowered average selling prices driven by reduced proportional shipments of high-end models coupled with price decreases for older smartphone models. Earnings for Samsung’s CE business declined substantially quarter on quarter due to reduced ASPs of TVs and an earlier-than-expected end to the peak summer sales season of home appliance products.

Despite Samsung’s gloomy outlook, the company has also announced plans to invest KRW15.6 trillion ($14.5 billion) in a new semiconductor plant in its Godeok Industrial Complex in Pyeongtaek. Construction of the new site will begin during the first half of 2015 and operations are scheduled to begin sometime during the second half of 2017. There have also been unconfirmed reports that Samsung plans to invest around $560 million in an industrial complex in Ho Chi Minh City, Vietnam to manufacture consumer electronics, with a focus on TVs.