HTC and Samsung ‘assailed by cheaper Chinese rivals’

Samsung's profits are driven by the success of Galaxy. Picture: Getty
Samsung's profits are driven by the success of Galaxy. Picture: Getty
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ASIAN smartphone giants HTC and Samsung found themselves on the ropes yesterday after missing second-quarter profit expectations.

The duo, often credited with taking market share from struggling western rivals Nokia and Blackberry in recent years, now find themselves assailed by cheaper Chinese rivals.

There are also signs that the highly lucrative smartphone market is slowing as consumers wait for the “next big thing”.

South Korea’s Samsung disappointed investors with guidance that it made 9.5 trillion won (£5.5 billion) in operating profit over the past three months.

The fact that is a record figure and is 47 per cent higher year-on-year was not enough to stop shares sliding almost 4 per cent. Analysts had pencilled in profits of more than 10 trillion won, which was already viewed as modest, and the company has a reputation for beating expectations.

The lower figure deepens worries that Samsung’s smartphone business may have peaked, as growth in sales of its blockbuster Galaxy phones begins to wane and new rivals emerge.

The Galaxy S range, powered by Google’s free Android platform, propelled the South Korean firm into the top rank of smartphone makers last year, even overtaking Apple, whose iPhone had set an industry standard five years earlier.

Now investors fear Samsung may follow in the footsteps other once-mighty players that are struggling with shrinking margins, in an industry where companies live and die by their ability to stay ahead of the innovation curve.

Jung Sang-jin, a fund manager at Dongbu Asset Management, said the key was whether the company could come up with another product that had the “wow” factor.

“Is Samsung’s smartphone story now over?” he asked. “Not quite yet. It’s growth is indeed slowing due largely to disappointing sales of the S4.”

“Yet I think Samsung has some exciting stuff up its sleeves. The problem is no-one is sure whether these products can really wow investors and consumers.”

Samsung makes other consumer electronics including TVs and memory sticks, but 70 per cent of its profit now comes from mobile phones.

Taiwan-based HTC also lagged behind forecasts when it reported quarterly profits of $1.25bn new Taiwanese dollars (£28 million).

Worse was news that it has cut back component orders and is unlikely to sustain sales growth into the third-quarter, as the glow around its flagship HTC One model is likely to be eclipsed by new products from bigger rivals.

Analysts also pointed to the fact that sales lost momentum towards the end of the quarter.