According to Wall Street Journal, Samsung will soon be announcing its quarterly operating profits that show a drop of 62 percent. With Samsung now facing competition from large screen Apple iPhone 6 and iPhone 6 Plus, its profit margins are being affected. The other reason for the dropping profit can be linked to lower selling prices of handsets and an increase in marketing costs as the competition in the smartphone market increases.
Samsung’s smartphone business is facing intense competitive pressure at the low-end from Chinese handset makers, and at the high-end from the iPhone. With the iPhone 6, Apple essentially wiped out Samsung’s distinguishing feature: a big screen size. And with the jumbo iPhone 6 Plus, Apple has now entered into the “phablet” segment that Samsung pioneered.
On the other hand, Samsung’s component business is expected to show an increase by 10 percent over the coming year which accounts for more than 40 percent of operating profits in 2015. Apple is one of the customers for Samsung’s component business, though it has now considerably reduced its orders to Samsung. TSMC is now getting majority of the orders for the A8 chip used in iPhone 6 and iPhone 6 Plus.