Samsung’s smartphone crown facing threat from Apple

SEOUL — Samsung lost the battle of the big phones last quarter as Apple’s copycat large iPhone lured buyers in the crucial Chinese market. The South Korean firm said yesterday its October-to-December profit sank, with an improvement in its semiconductor business insufficient to mask its mobile problems.

It was in China, the world’s largest market for smartphones, where Samsung’s decline was most evident. Its weakness there is a key reason Samsung’s share of global smartphone sales dropped to about one-quarter last year from a one-third share in 2013.

Samsung and Apple each shipped 74.5 million smartphones globally in the fourth quarter to grab 19.6 per cent of the market each, Strategy Analytics said yesterday. This is the first time since late 2011 that Samsung has not had a big lead. Apple contributed to Samsung’s latest reversal in fortune, launching iPhones with bigger screens that robbed Samsung’s Galaxy phones of a key selling point. Samsung was already battling competition in low-end phones from upstart manufacturers such as China’s Xiaomi.

Samsung is struggling in countries such as China because it is “sort of being eaten from the bottom up by regional players” including Huawei and Xiaomi, said Mr Ben Bajaran, an analyst at Silicon Valley research firm Creative Strategies. “And now with Apple being competitive in larger phones, you’re seeing Samsung losing any edge it had at the high end,” he said.

Samsung said earnings from smartphones and other mobile gadgets dropped 64 per cent annually in the October-to-December period to 1.96 trillion won (S$2.4 billion), contributing to its first annual earnings fall in three years. It was the mobile division’s fifth consecutive quarter of decline.

The semiconductor division was a bright spot as Samsung posted fourth-quarter operating profit of 5.3 trillion won. The result put the firm’s 2014 profit at 25 trillion won, down from a record 36.8 trillion won in 2013 and the lowest since 2011.

Analysts say Samsung is under immense pressure to hang on to its market share, with a lot resting on the launch of its next flagship Galaxy S6 smartphone, due around March. AGENCIES