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South Korean firm's quarterly profits up 47% on 2012, but analysts fear smartphone maker faces saturated markets
Shares in Samsung Electronics fell on Friday, despite the company forecasting a record quarterly profit for the second quarter of 9.5tn won (£5.5bn)), up 47% on a year ago, as it fell short of analyst expectations.
The shares fell by nearly 4% on the Seoul stock market as the company was preparing to announce 20m shipments of its new Galaxy S4 flagship phone, two months after its release.
Analysts are increasingly concerned that Samsung, like its principal smartphone rival Apple, is facing saturated markets in the developed world as ownership passes the 50% mark in many countries.
Average smartphone ownership in the US and Europe is heading towards 60%, leaving few new buyers to expand the business at the high end. Mobile network operators are also cutting subsidies for phones, making high-end phones seem more expensive.
South Korean networks cut subsidies for new phones this year, contributing to weaker Galaxy S4 sales in Samsung's home market and higher marketing spending for the handset maker, Seo Won-seok, an analyst at Korea Investment & Securities, told AP.
China is the fastest growth area in smartphones, but at low prices with highly competitive markets. Samsung has been releasing cut-down versions of the S4 to try to protect its market share from those rivals such as ZTE and Huawei.
The high-end saturation seems to be reflected in Samsung's Galaxy S4 figures. Though shipments of the S4 in the first month after release were twice as high as for last year's Galaxy S3, the time it took to reach the 20m mark suggests shipments were only 60% up – implying a slowing of shipments.
The company still dominates the smartphone and "featurephone" business, shipping about half of all smartphones and a quarter of all mobile phones worldwide. It is the biggest seller of phones running Google's Android software, garnering about 95% of all profits in the Android space.
Samsung said total sales in its electronics division had grown 20% to 57tn won (£33.2bn). The South Korean company will announce its full audited quarterly results later this month.
Analysts suggested that high marketing costs – which exceeded those for research and development for the first time in three years – may have hit the profit figure, despite the strong first-month sales.
"Because of the marketing costs, the telecommunications business was probably weaker than expected," CW Chung, an analyst at Nomura Financial Investment in Seoul, told the Associated Press. "Semiconductor and other businesses seem to have improved from the previous quarter."
Analysts cut their figures last month for the total numbers of S4 phones Samsung will ship this year from around 80m to 60m.
"Apple is suffering from iPhone fatigue, while Samsung is suffering from Galaxy fatigue," Neil Mawston, executive director of Strategy Analytics, told Bloomberg ahead of the financial announcement.
Samsung is also increasingly reliant on its mobile business for growth. Samsung's division that makes and sells mobile phones, tablet computers and cameras contributed 75% of its operating income in the first quarter of this year. Analysts surveyed by FactSet said 60% of Samsung's second-quarter sales likely came from the mobile business.