Samsung on Tuesday warned of a hefty 24% decline in operating profit in the second quarter of the year in no small part due to slowing growth and rising competition in the smartphone market.
However, the South Korean vendor said it is "cautiously" optimistic on the current quarter, predicting an uptick in smartphone demand driven by its new device range.
Samsung expects to post an operating profit of 7.2 trillion won (€5.2 billion) for the three months to the end of June, down from KRW9.5 trillion in the year-ago quarter. The firm sees revenues falling by 9.5% to KRW52 trillion (€37.8 billion).
"Samsung Electronics' weak Q2 earnings forecast is the result of the strong Korean currency, declined smartphone and tablet shipments, and increased marketing expenses to reduce inventories," the vendor said in a statement.
More specifically, Samsung said that smartphone shipments fell as a result of competition in China and Europe.
In China the vendor faced weak seasonal demand, slower demand for 3G phones as LTE gains traction, and intense price competition from domestic handset makers. There was also weak demand in Europe, but Samsung said it maintained a 40% market share.
Samsung also saw tablet shipments fall by more than it expected as demand was slow and the lack of operator subsidies means customers do not upgrade their devices regularly.
"Therefore, the second quarter earnings were negatively affected by [a] substantial increase of marketing expenses from the previous quarter due to strong sell-out promotion to reduce channel inventories in addition to marketing promotions for new smartphone and tablet launch[es]," Samsung explained.
Those marketing expenses will continue to a certain extent in the current quarter as Samsung works hard to reduce inventory.
However, "the company cautiously expects a more positive outlook in the third quarter led by increased shipments of the coming release of its new smartphone line-up," it said.