Samsung, the world’s largest cell phone manufacturer, is facing a major decline in its third quarter profits, reporting less than half of the earnings they posted in the third quarter of last year. This is mostly due to weak smartphone sales.
One of the factors contributing to the slow smartphone sales is the development of low-end smartphones from Chinese manufacturers. According to The Wall Street Journal, Samsung gets more than 60% of its profits from mobile phone sales, targeting users at all price points. With stiff competition underway in large markets, the company simply cannot keep its sales high enough to yield strong profits.
Samsung’s stocks are down about 15% so far this year, and those numbers may continue to drop as more phones come onto the market. Last year, the company reported more than $10 billion in profits during the third quarter of 2013, but dropped to $4.3 billion for the third quarter this year.
Another factor that may be playing into this decline is the comparable decline of the CEO’s heath. Chairman Lee Kun-hee had a heart attack last May, and he reportedly has not fully recovered. Some critics say the company lacks the visionary it needs to boost profits once again.
Nevertheless, there is hope for the South Korean company in the memory chips they manufacture. As more phone makers choose these chips because of their reliability, versatility and advanced technology, Samsung may once again generate the profit it needs.