Samsung now most profitable mobile phone company

Samsung profits overtook rival Apple. Picture: Getty Images

Samsung profits overtook rival Apple. Picture: Getty Images

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Apple has lost its crown as the world’s most profitable mobile phone maker to rival Samsung, which is outpacing the US group in the crucial Chinese market.

However, the South Korean technology giant disappointed investors yesterday by unveiling lower-than-expected profits for the second quarter and indicating that its smartphone sales growth may be slowing.

Samsung has an estimated 19 per cent share of China’s $80 billion (£52bn) smartphone market, which is expected to grow in value to $117bn by 2017, according to market researcher IDC. That compares with Apple’s share of 9 per cent.

As well as losing ground to Chinese rivals such as Huawei and ZTE, Apple is struggling to compete against Samsung, which sold ten million of its flagship Galaxy S4 handset around the world within a month of its launch in April.

Samsung’s handset division achieved an operating profit of $5.2bn (£3.4bn) for the three months to June, according to Strategy Analytics, surpassing estimated profits of $4.6bn for Apple’s iPhone business.

Neil Mawston, executive director at the research firm, said Apple’s reign as the world’s most profitable handset maker had lasted almost four years, from the third quarter of 2009 to the first three months of this year.

He added: “Apple is now under intense pressure to launch more iPhone models at cheaper price points or with larger screens to fend off the surging competition and recapture lost profits in the second half of 2013.”

While quarterly sales of Apple’s iPhone handsets jumped 20 per cent to 31.2 million, much of the growth came from older and cheaper versions of the smartphone, and the resulting drop in margins pushed the group’s profits down 22 per cent to $6.9bn, although this was ahead of Wall Street forecasts.

Revenues in China, Hong Kong and Taiwan fell sharply, but chief executive Tim Cook is aiming to double the firm’s number of retail stores in the region over the next two years. Apple currently has eight stores in China and three in Hong Kong.

Global mobile phone shipments reached 386 million in the second quarter, up 4 per cent on a year ago, driven by demand for entry-level Android devices in Asia and Latin America.

Neil Shah, senior analyst at Strategy Analytics, said: “Samsung continued to dominate, shipping 107 million mobile phones worldwide and capturing a solid 28 per cent market share to solidify its first-place lead.”

However, the South Korean group said sales growth may weaken in the third quarter as competitors turn up the heat. Apple is expected to release the iPhone 5S and a low-end handset later this year.

Samsung’s net profits for the second quarter jumped 50 per cent to 7.77 trillion won (£4.5bn), below market forecasts of 7.96tn won, while profits at its mobile division – which generates two-thirds of total earnings – slipped 3.5 per cent from the previous quarter.

Ahn Young-hoe, a fund manager at KTB Asset Management, said: “It is clear that the global smartphone market is stalling because of the slowing growth of high-end smartphones and rising competition from lower-priced smartphones.”

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