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Seoul - Smartphone leader Samsung Electronics faces a third straight quarter of profit decline that could become a fourth as cheaper models grab a bigger share of a slowing market and Apple readies the launch of its iPhone 6.
Samsung Electronics' woes, exacerbated by a won that has risen to a six-year high against the dollar, come at an awkward time for the flagship of South Korea's largest conglomerate.
The maker of the Galaxy smartphone is expected to say on Tuesday that earnings likely fell 12.6% for the quarter ended June, according to a Thomson Reuters I/B/E/S poll.
Product launch
The group's patriarch Lee Kun-hee has been hospitalised since May following a heart attack and the succession map for his three children - including heir-apparent Jay Y Lee - remains unclear.
"Samsung's heyday has gone. Its profit growth was abnormally high for the past three to four years and now that is normalising," said Chang Sea-Jin, a business professor at Korea Advanced Institute of Science and Technology and author of the book "Sony vs Samsung".
Analysts say Samsung's top-end Galaxy S5 handset, released in late March, is selling well but not well enough to offset weaker shipments for low- and mid-tier devices. Its next big product launch, the Galaxy Note 4, is expected later this year but is not forecast by analysts to be a game-changer.
Its foray into wearable devices like the Gear smartwatch, meanwhile, remains at an early stage and faces tough competition from Apple and others. That leaves Samsung Electronics under margin pressure and without a clear new growth driver for the immediate future.
Slowing market
Samsung has said it will boost dividends and those plans are expected to be detailed when full results for the three months ended June are released later this month.
That may placate investors who have sent its shares down about 5% this year, lagging the flat performance of the benchmark Korea Composite Stock Price Index.
Some analysts have also said it could buy back shares this year, part of a broader group restructuring tied to succession.
"Obviously, paying dividends is better than nothing, but I question how much merit there is to that given how tech companies are supposed to be growth stocks," said Um Joon-ho, fund manager at Kiwoom Asset Management.
Local brands
Samsung's cash cow handsets business is suffering from slowing market growth and improving product quality from Chinese manufacturers such as Huawei Technologies and Lenovo Group.
Research firm IDC expects global smartphone shipment growth this year to slow to 19.3% from 39.2% last year, while average sales prices are also seen falling.
Samsung's first-quarter market share fell to 30.2% from 31.9% a year earlier, according to IDC Huawei and Lenovo gained share.
Samsung's shipments were hurt by an apparent move by Chinese carriers to promote cheaper local brands, analysts said.
"If Samsung lowers the prices for its mid-to-low tier line-up, that will hurt their short-term profits, but their competitors will have to slash prices too and may not be able to turn profits," IBK Securities analyst Lee Seung-woo said.
