Samsung fourth quarter hit by smartphone competition

Samsung Electronics reported its first annual earnings decline in three years in the face of increased competition in the smartphone market

Samsung Electronics reported its first annual earnings decline in three years, with fourth quarter (Q4) profit down 27% to 5.3tn won ($4.8bn) and annual profit down 23% to 23.39tn won ($21bn).

Analysts attributed the lowest annual profit since 2011 mainly to competition from iPhone maker Apple and Chinese rivals. They said Samsung’s Galaxy phones have suffered in the high-end market thanks to the popularity of the iPhone 6, while its dominance of the middle- and low-end handset segment has been challenged by Chinese firms such as Huawei, Xiaomi and Lenovo.

In contrast to Samsung, Apple reported its best-ever quarter with 74.5 million iPhones sold, accounting for 21% of total revenue and making Apple the top seller of smartphones in China.

That 74.5 million number alone is equal to Samsung in Q4, according to Bloomberg, citing an emailed statement by Strategy Analytics, which draws the rival companies level for the first time. That gives both Apple and Samsung a 19.6% smartphone market share, with Lenovo coming in third at 6.5%, according to Business Insider.

Revenue in Samsung’s mobile business, which was responsible for record earnings in 2013, fell 23% in the fourth quarter compared with the same period a year ago and was down 19% overall compared with 2013. Overall, the South Korean tech firm’s sales fell 11% in the fourth quarter compared with the same period the year before and 10% for the year compared with 2013.

Samsung said it plans to improve smartphone earnings with an expanding product line, but the company expects demand for smartphone and tablets to decrease in the first quarter due to seasonal factors.

However, Samsung reported a 19% increase in operating profit for its semiconductor division in the fourth quarter, a 36% increase compared with same period in 2013.

Despite its earnings coming within market expectations and a strong outlook for its semiconductor division, Samsung’s shares fell 1.6% in morning trade.

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