Just a few quarters ago, Samsung Electronics was riding a tidal wave of momentum to the top of the smartphone world, quashing the Android competition and, yes, even Apple. Its business is simply enormous.
Now, according to its second quarter results for 2014, the Korean electronics behemoth is suddenly reeling, despite the launch of an impressive new flagship, the waterproof Galaxy S5. Net profit is down 15% at $6.1 billion (6.25 trillion won), from $7.58 billion in 2013. Its mobile and IT division, typically Samsung’s biggest revenue driver, saw operating profit fall by 31%. The company sold 95 million phones and 8 million tablets, which was about what the company expected, and it expects sales to pick up again next season.
What’s going on? The Wall Street Journal reports that profits are being “squeezed by low-cost Chinese competitors.” Samsung said it was also experiencing inventory problems, particularly in the European market, where sales have traditionally paled to Asia, and even in the United States. As a result, according to a report from IDC, a market research firm, Samsung’s command of the smartphone market fell to 25% from 32% in 2013.
In light of the grim numbers, Samsung’s executives in the mobile division, including JK Shin, one of the company’s CEOs, have returned 25% of their bonuses received earlier this month. It is unclear how large those bonuses were.