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Samsung suffers as smartphone sales drop

The smartphone, semiconductor and consumer electronics company reports shortfall in earnings

Electronics giant Samsung has reported net profit of £2.9bn for the second quarter of 2015, £0.5bn less than the £3.41bn it reported for the same period the year before.

Sales in its mobile division were £1.4bn, which is £100m less than in 2014. The company stated that it would be making a "strategic adjustment" to the price of its high-end S6 model and would be launching new large-screen devices.

According to the BBC, sales of the S6 smartphone fell short of expectations because the company could not meet the demand for its flagship model.

At the same time, rival Apple has been gaining ground. The firm recently reported a strong quarter ending 27 June 2015, driven by record sales of iPhone and Mac, record revenue from services and the launch of Apple Watch.

According to analyst IDC, Samsung is the largest smartphone maker, with 24.6% market share, 6.3% ahead of Apple. But it remains second, behind Apple, in terms of tablet shipments.

Jean Philippe Bouchard, IDC research director for tablets, said: "We're seeing a profound shift in the vendor landscape as the top two vendors, Apple and Samsung, lose share in the overall market. In the first quarter of the year, Apple and Samsung accounted for 45% of the market and this quarter, with the growth of vendors like LG, Huawei, and E-Fun, their combined share dropped to 41%."

IDC said longer life cycles, increased competition from other categories such as larger smartphones, combined with the fact users can install the latest operating systems on their older tablets, has stifled the initial enthusiasm for these devices in the consumer market.

Like Apple, Samsung has also introduced a mobile wallet. Working with Mastercard Digital Enablement Services, the Samsung Pay service is scheduled to launch in the US and South Korea later in summer 2015. The company plans to roll out the payment service in Europe, but did not give any details of when it would be available.

Beyond mobile, Samsung’s semiconductor division grew fastest, with 10% year-on year growth, thanks to demand for high-density DDR4/LPDDR4 memory chips, along with the shift to high-density storage and broader adoption of solid-state drives.

According to analyst Gartner, memory manufacturers currently enjoy a strong chip-pricing environment, which sets the stage for continued spending growth through 2015. But Gartner research director Bob Johnson said he anticipates an oversupply in DRAM in 2016, which he said would lead to a 13.6% decrease for worldwide memory spending in 2016.

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