NEW YORK (TheStreet) -- Samsung's dismal quarterly performance, leading to a 25% decline in profits, are likely to get worse before they get better, as the company warned that the second half of the year would be "a challenge" and Apple (AAPL) is likely to refresh its iPhone later, starting in Sept.
That challenge is coming not only from Apple's iPhones at the top-end of the smartphone business, but from mid and low-priced handsets made by small manufacturers and selling well in China and the world's emerging markets.
IDC analyst Ramon Llamas says Samsung is really "feeling the pressure from every area." In a phone interview, Llamas said Samsung is the top manufacturer and it's also "the biggest target." He thinks Samsung's problems are three-fold: it's struggling in the low-end marketplace, competitors such as LG and Motorola are currently offering high-quality alternatives and that "the writing is on the wall" for Samsung once Apple introduces its larger-screen models.
Samsung announced a net profit of $6.1 billion in the second quarter, down from $7.6 billion in the year ago quarter. Operating profits of $7.02 billion fell 15% sequentially, and 25% from the same quarter last year.
Nick Spencer of ABI Research thinks Samsung is "caught in the middle ground" between low-cost Chinese phones and the iPhone. In an email, Spencer added, "Samsung has also always relied on supply chain excellence (scale and manufacturing its own components) to allow it to create dozens of different models to satisfy every conceivable price point, form factor and regional taste. This is inefficient, which is fine when you have margin to play with and have the lowest manufacturing costs, but both of these are being squeezed by Chinese manufacturers."