In its second quarter (Q2) earnings announcement Thursday, Samsung Electronics Co. Ltd. said net profit for the quarter declined 8 percent over the same period last year. The decline in net profit is largely due to lower than expected demand for Samsung’s flagship Galaxy S6 smartphone combined with continuing competition in China.

The latest profit decline marks the fifth consecutive year-over-year slide as Samsung continues to cede market share and profit margins from mid-range smartphones to manufacturers from China and India.

Samsung reported net income for the quarter ended June 30 of 5.75 trillion Korean won ($4.9 billion), down from 6.25 trillion won in the year-ago quarter.

Profits from mobile tumble

The biggest contributor to Samsung’s profit decline was the company’s mobile business unit, reporting a profit decline of 37.6 percent to 2.76 trillion won over the year-ago quarter.

Following the April launch of its new flagship smartphone, the Galaxy S6, and its dual curved-screen companion, the Galaxy S6 Edge, higher than expected demand for the Galaxy S6 Edge left Samsung with a supply shortage for the curved screen smartphone, while lower than expected demand for the Galaxy S6 resulted in unsold stock.

Too little, too late?

Samsung has since corrected the supply imbalance but the damage to Q2 earnings had already been done. The mobile business unit achieved an operating margin of just 10.6 percent, down from 15.5 percent for the same period last year, and about equal the first quarter despite a new flagship going on sale.

To further compound Samsung’s woes, analysts estimate that the average selling price of Samsung smartphones is now below $300, 10 percent lower than a year ago; the result of a price war with low-cost Asian manufacturers.

By comparison, Apple, Samsung’s rival for the high-end smartphone market, has managed to increase the average selling price of its iPhone by $100 to $622 since the launch of the iPhone 6 and 6 Plus last year.

In an effort to capitalize on the success of the curved screen Galaxy S6 Edge, Samsung is releasing a larger-screen Galaxy S6 edge+ alongside its new Galaxy Note 5 phablet at a special event scheduled to take place on August 13.

Semiconductors saved the day

Samsung’s Q2 revenue declined 7.3 percent over the year-ago period to 48.54 trillion won.

The company’s results were largely bolstered by a strong performance from its components business unit.

Thanks to an 83 percent increase in operating profits over the year-ago quarter to 3.4 trillion won, semiconductors accounted for 49 percent of total Q2 profit, compared to a 40 percent contribution from the mobile business unit.

Image credit: Maurizio Pesce, Flickr, CC BY 2.0