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Samsung has released its Q4 earnings results, revealing a rather big drop in profit. That said, it’s not all that doom and gloom. The world’s largest smartphone manufacturer is changing its course in a mission to develop an internet-connected device ecosystem or dominate the Internet of Things (IoE).
In line Bloomberg analysts predictions, the South Korean electronics giant’s operating profit for the quarter will be 5.2 trillion won (over US$4.7-billion). This means that Samsung is earning 37% less than one year ago. Despite this fall, the company still managed to beat the predictions of most analysts.
According to analysts, the mobile phone sector of Samsung made up less than 30% of its total earnings. It’s main source of profit comes from the semiconductors which are sold to, among others, smartphone competitors like Apple and the fast-growing Xiaomi from China.
The company is also expected to make fewer smartphones in 2015.
“Apple and Chinese producers are rivaling Samsung in smartphones, but they are also its biggest customers for components, especially in memory chips,” said Greg Roh, a Seoul-based analyst at HMC Investment Securities Co. “It’s about the right time for Samsung to find the sweet spot from its component businesses rather than from end-product units.”
Why is Samsung going through a slump? Well, largely because it’s focusing its resources on the construction of a US$14.7-Billion chip manufacturing plant in South Korea which will help usher in a new era of internet devices.
At CES this year Samsung CEO BK Yoon announced that by 2017 90% of Samsung devices will plug into the IoE ecosystem, and 100% in five years.
If recent trends are anything to go by, Samsung’s investment will prove to be fruitful. According to recent reports, there were around 60 IoE related acquisitions in 2014 at a total value of US$14.3-billion. This makes 2014 the biggest year for the IoE.