Samsung Electronics Co Ltd 005930.KS posted its slowest quarterly profit growth in more than a year on Tuesday as the sluggish global smartphone market weighed on earnings, although the chip business continued to perform well.
Adding to its troubles, its vice-chairman Lee Jae-yong, scion of the founding family, was jailed previous year for his part in the corruption scandal that brought down former president Park Geun-hye.
Operating profit rose just 5.7 per cent to £10.14 billion ($13.3 billion) in its second financial quarter, its lowest climb since the first quarter of 2017. The IT & Mobile Communications division which handles Galaxy smartphones experienced a 20% fall in sales from KRW30 trillion to KRW24 trillion on a yearly basis.
Although its semiconductor business was a bright spot, achieving record operating profits of 11.6 trillion won, the earnings were lower than expected - with market forecasts averaging 12 trillion won. "We have emphasised more on the camera, which is one of the most used features by millennials today", Sandeep Singh Arora, Vice President, Online Business, Samsung India, said in a statement.
Leaks and rumors have shown a horizontal rear dual camera setup with the fingerprint sensor under it as some of the only external changes on the upcoming Samsung Galaxy Note 9. Also, Samsung plans to strengthen price competitiveness and adopt advanced technology in the mass models.
"Consumers are losing the belief that the next version of a smartphone is actually smarter", said Paul Swiercz, a management professor at George Washington University.
"Even those wanting to own the latest and greatest are having difficulties paying high-margin prices for performance and features that have topped out".
"The mobile market condition will likely remain challenging in the second half amid pricing competition and new product launches". NAND prices might be down, but demand from the cloud computing and cryptocurrency industries kept DRAM prices up.
Revenue for the April-June period fell 4 percent to 58.5 trillion won, broadly in line with Samsung's earlier estimate.
The mobile business booked a 34 percent fall in operating profit to 2.7 trillion won ($2.4 billion) in the second quarter, its biggest decline since the Galaxy S7 was Samsung's flagship model early past year.
Samsung shares were down 0.5 per cent in early trading, compared with 0.2 per cent drop in the broader market.