Samsung posted first profit slump on soft smartphone demand

A product expert holds a Samsung Galaxy S6 Edge+ at the product's launch event in New York August 13, 2015. Samsung Electronics Co Ltd unveiled a new Galaxy Note phablet and a larger version of its curved-screen S6 edge smartphone, marking a fresh bid by the South Korean tech giant to revive momentum in its handset business. [Photo/Agencies]

SEOUL-- Samsung Electronics, the world's largest smartphone maker, posted its first profit slump in five quarters as soft demand for smartphones dampened the company's Galaxy device sales and lowered prices of components such as chips and display panels.

Operating profit was 6.14 trillion won ($5.08 billion) during the October-December period, down 16.92 percent from 7.39 trillion won in the previous three months, a regulatory filing showed Thursday.

After bottoming out at 4.06 trillion won in the third quarter of 2014, Samsung's operating profit continued to rise to 7.39 trillion won in the third quarter of 2015. But, it slumped to 6.14 trillion won in the next quarter, registering the first fall in five quarters.

Samsung said that global economic uncertainties dented demand for overall IT products, including smartphones, and it resulted in lower prices of components such as memory chips and display panels, contributing to its profit decline.

Revenue was 53.32 trillion won in the three months through December, up 3.16 percent from 51.68 trillion won in the third quarter. But, net income tumbled from 5.46 trillion won to 3.22 trillion won in the fourth quarter.

Samsung said that unfavorable foreign exchange rates caused a currency loss of about 400 billion won during the quarter. The company gained some 800 billion won from favorable currency moves in the previous quarter.

The IT and mobile division, which makes smartphones, posted a fall in operating profit from 2.4 trillion won in the third quarter to 2.23 trillion won in the fourth quarter. Its revenue was 25 trillion won, taking up nearly half of the total revenue of Samsung Electronics.

Samsung sold 97 million handsets in the three months through December. Its smartphone sales accounted for the mid-80 percent of the total, the company said at a press conference. An average selling price of its handsets was in the mid-range of $180.

Operating profit of Samsung's chip-making unit tumbled from 3.66 trillion won to 2.80 trillion won in the fourth quarter due to lower DRAM chip prices and soft demand for overall IT products.

The unit's revenue was 13.21 trillion won in the fourth quarter, accounting for about a quarter of Samsung's total revenue. Demand for application processors continued on the launches of new devices, but those for chips used for PCs declined.

The display panel division's operating profit also plunged from 930 billion won to 300 billion won. Its revenue was 6.53 trillion won in the fourth quarter, down from 7.49 trillion won in the third quarter.

Organic light-emitting diodes (OLED) panel sales increased, but liquid crystal display (LCD) panel sales declined on saturation of the market.

The consumer electronics business posted more than twofold in operating profit from 360 billion won in the third quarter to 820 billion won in the fourth quarter, with revenue increasing to 13.85 trillion won.

Samsung's TV shipment increased, particularly in North America, with sales of refrigerators and washing machines growing thanks to promotion events for the Black Friday shopping season. The world's largest TV maker sold 16 million TVs in the fourth quarter, Samsung said at a press conference.

For the whole year of 2015, Samsung's operating profit increased 5.55 percent from a year earlier to 26.41 trillion won.

Revenue dipped 2.69 percent to 200.65 trillion won in 2015, and net income tumbled 18.5 percent to 19.06 trillion won.