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Caught between China and low-cost phones, Samsung’s mobile profits plunge

Samsung may have to look beyond the Galaxy to find phone profits. The company announced its third quarter results on Thursday and, even with a preemptive warning earlier in the month, the news is grim: Mobile profits fell 74 percent from the year-ago quarter, notes the Wall Street Journal.

Galaxy Note Edge white

The mobile division brought in 1.75 trillion Korean Won (U.S $1.65 billion), which nears profit levels the company earned in early 2011. Sales pressure pushed profit margins down to seven percent, according to the WSJ. By comparison, Apple’s iPhone margins are routinely five to six times that figure and the handset contributed more than 56 percent to the company’s total revenue in the most recent quarter, even though Apple sells far fewer phones than Samsung.

Galaxy s5 versus iPhone 5s

China is surely a big, or at least growing factor, in Samsung’s sales woes. The company was just displaced by China-based Xiaomi as the top phone-seller in the country and grew sales by 211.3 percent in the past year reports research firm IDC. Samsung will surely find tough competition in the world’s most populous nation as Xiaomi’s momentum is rising due to capable Android phones such as the Mi4 handset, which are priced less than Samsung’s Galaxy flagships.

Samsung’s high-end phones are only part of the problem, though. Since 2010, the company has focused largely on its Galaxy line of handsets to help it become the top-selling smartphone maker in the world. Such a singular strategy isn’t good to stay on top, however. The company has no entry-level smartphones that are reasonably priced. The margin on such devices may be lower, of course, but that can be made up in volume to help boost mobile profits.

Instead of adding side-displays to the edge of a phone that may cater to a few, Samsung might be better served by bringing its innovation to a wider audience at a lower price.

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