Samsung Forecasts Third Quarter Profit Plunge, Cites "Intense Competition" In Smartphone Space

Samsung's quarterly operating profit is headed for a cliff and there's nothing the South Korean electronics giant can do about it at this point. After two consecutive quarters of annual declines in global smartphone share, Samsung stated in a regulatory filing that it expects a 59.65 percent drop to 4.1 trillion won (around $3.8 billion) in operating profit for the third quarter.

That's the lowest it will have been in more than three years, and it's largely due to Chinese manufacturers producing cheaper smartphones that ultimately cut into the company's bottom line, along with expensive ads.

Galaxy Note 4

"Smartphone shipments increased marginally amid intense competition. However, the operating margin declined due to marketing expenses related to aggressive promotions and lowered ASP (Average Selling Price) driven by reduced proportional shipments of high-end models coupled with price decreases for older smartphone models," Samsung stated in its filing.

All those ads poking fun at Apple come at a cost, though it's not just the smartphone category that is suffering. Samsung also noted a drop in its logic chip business and OLED panel shipments due to weaker than expected demand in the mobile product category.

Samsung recently launched its Galaxy S5 smartphone and Galaxy Note 4 phablet, a pair of products that will compete against Apple's iPhone 6 and iPhone 6 Plus devices for dominance in the high-end handset market. However, Samsung's future outlook may depend on the company's ability to build less expensive devices to fend off the competition that's been biting at the company's heels.