Samsung's Galaxy S5 has already got off to a weak start at home

Smartphone competition sees Samsung profits decline

Samsung will post a second straight quarter of profit decline as smartphone margins come under growing pressure from cheaper Chinese rivals.

The South Korean firm is counting on the fifth version of its flagship Galaxy S smartphone, which goes on sale globally from Friday, to right the ship and prove the firm's staying power as a high-end innovator.

But the Galaxy S5 has already got off to a weak start at home, with its South Korean debut marred by a temporary ban on mobile carriers selling handsets and criticism that it lacks eye-catching new features.

Underscoring the challenges, Samsung priced the S5 about 10 per cent cheaper than the S4 even though main rival Apple is not widely expected to update its line-up until September. It also dialled back on marketing glitz to keep margins stable.

Samsung estimated on Tuesday its January-March operating profit fell by 4.3 per cent to 8.4tn won (£4.8bn), slightly below an average forecast of 8.5tn won by 40 analysts polled by Thomson Reuters I/B/E/S.

Samsung estimated its first-quarter sales at 53tn won, compared with a market forecast of 54.58tn won. The firm gave no breakdown of mobile earnings but the unit typically generates about 70 per cent of total profit. Full quarterly results are likely to be announced by April 25.

Analysts said the company's efforts to rein in component costs and make products that appeal to a wider audience will be crucial as Samsung braces for what could be its first annual profit decline in three years.

"In some sense, Samsung has no way to prevent a decline in its earnings without improving internal efficiencies," HMC Investment and Securities analyst Greg Roh said.

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