Selling smartphones is a tougher gig.
Samsung Electronics (SSNLF) forecast its slowest profit growth in a least a year Friday as global smartphone demand slows and competition from low-cost rivals intensifies, suggesting the Apple Inc. (AAPL) - Get Report rival may miss full year sales targets.
Samsung said it expects operating profits of around $13.2 billion for the three months ending in June, a figure that fell modestly shy analysts forecasts but is still a 5.2% advance from the same period last year. However, disappointing demand for its flagship Galaxy S9 and ongoing concerns related to its chip sector sales and a price fixing investigation in China weighed on shares and point to a tough road ahead in the second half of the year.
Samsung shares were marked 2.3% lower by the close of trading in Seoul following the earnings forecast, which will be detailed in full later in the month. The stock has fallen just under 12% so far this year, compared to a 9.5% gain for smartphone rival and Action Alerts Plus holding Apple.
Last month, market searchers at CounterPoint said the iPhone 8 topped the Galaxy S9 as the world's top-selling smartphone, thanks in part to the latter's poor sales in Europe. Samsung has a full-year handset shipments target of 350 million units - an upgrade from 320 million earlier this year and a figure it may need to revise if second quarter sales dip below the 72 million unit market . However, the impending August launch of its new Galaxy Note flagship could alter both the company's and investors' expectations.
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Samsung is not only seeing increased competition from Apple and its new iPhone suite, but also from China-based handset makers, many of which are moving from their "low cost" reputation to the higher-end of the global market, especially as demand wanes.
Oppo, for example, China's second-largest handset maker, unveiled a €999 ($1,320) unit called the FindX while its domestic rival, Vivo, is marketing a $780 smartphone called the Nex.
That said, Strategy Analytics, a closely-watched industry benchmark, sees global handset sales only rising by 1.4% by the end of the year to 1.49 billion units, although 5-G network rollouts in 2019 and beyond should reignite appetite in the near-term.
Apple will publish its fiscal third quarter earnings on July 31, with investors looking for the Cupertino, Calif.-based group to meet or beat its $51.5 billion to $53.5 billion revenue guidance with a gross margin of between 38% and 38.5%. Apple shifted 52.2 million handsets in it previous quarter, a figure which translated into $61.1 billion in revenue and a $728.30 average selling price.