Samsung's net profit falls 40% in Dec quarter

The company continued to be squeezed at both ends of the lucrative smartphone market, with high-end competition from arch rival Apple matched by cheaper players like China's Huawei and Xiaomi

Slowing global demand for smartphones as well as memory chips dealt a blow to Samsung Electronics as it reported on Thursday a 40 per cent on-year drop in fourth-quarter net profit.

The world's top handset maker continued to be squeezed at both ends of the lucrative smartphone market with high-end competition from arch-rival Apple matched by cheaper players like China's Huawei and Xiaomi.

Net profit for October to December stood at 3.22 trillion won ($2.7 billion), below analyst expectations and down 39.7 per cent from a year ago, the firm said in a statement.

Operating profit rose 16.1 per cent on-year to 6.1 trillion won, in line with its earlier estimate.

In a statement, the South Korean giant said 2016 was expected to throw up continued challenges to maintaining earnings "due to a difficult business environment and slowing IT (information technology) demand".

Fourth quarter earnings were down in the face of "global economic headwinds" including a sharp fall in oil prices, as the components side of the business was impacted by weakened prices for DRAM chips and LCD panels due to overall softer demand in the IT market and personal computers.

Samsung's semiconductor business since late 2014 has helped offset slumping profits at the firm's key mobile unit.

But sluggish demand for handsets and computers worldwide drove down prices for memory chips, squeezing margins in the semiconductor unit, which posted the first drop in quarterly operating profit for about two years.

The strengthening of the Korean won compared to major currencies meant a positive forex impact in the third quarter "changed to a negative impact" of approximately 400 billion won in the October-December period, it added.

"The global slowdown affected all the firm's business segments ... I see no major factor to boost profit down the road," said Lee Seung-Woo, analyst at IBK Investment and Securities.

"The situation looks pretty bleak," Lee said, warning of a further slip in global chip prices during the first half of this year.

Following the earnings report, shares of Samsung fell 1.56 per cent in early trading to 1,156,000 won.

Samsung lost more than $8 billion in market value in 2015, with its flagship smartphone business struggling to hold market share.

Sales of the Galaxy S6 - the latest edition of Samsung's top-of-the-range handset, launched in April - failed to generate much excitement among consumers.