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By | Simon Rockman 7th October 2014 11:02

BIG trouble in Big China: Samsung cops it RIGHT in the wallet

XiaOW-ME - that's gotta hurt

Analysis Competition from Chinese smartphone makers has mashed Samsung's China sales, resulting in a warning from the Korean company that its third quarter earnings would drop by 60 per cent when compared with the previous year.

We’ve seen how Xiaomi, whose CEO fashions himself on Steve Jobs, is more of a threat to Samsung than Apple. However, it seems that both of the big two are coming under increasing pressure from loyalty to local brands – if not manufacturers – particularly in India. There is also pressure from Wiko in France and other local vendors – according to some studies.

Competition affects both volumes and average selling price, which is why it’s no surprise that investors saw this coming. Samsung’s preliminary guidance of operating profit for the three months to 30 September is 4.1 trillion won ($3.8bn, £2.4bn) – down from 10.2 trillion won in the previous year and 7.2 trillion won in the second quarter. Revenue was down 20 per cent year-on-year to Won47tn, but the figures were already factored in and the share price didn’t take a hit, and rose 0.8 per cent on the news.

It’s not looking good for the future either, with Gartner claiming that the Chinese vendors dominate white-box smartphones and fondleslabs.

Samsung is still the global leader in handsets, but its crown is slipping. It could claim 32 per cent of smartphone sales a year ago but just 25 per cent last quarter. It’s telling how significant smartphones are to a huge company like Samsung Electronics – which even makes training shoes – and the company is looking to expand in other areas, spending $15bn on building a new semiconductor factory, an amount so large it could well distort the famously fragile price of DRAM, which has been good for the business while computers have not.

Forget “peak Apple” – it looks as though we are past Peak Samsung. ®

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