Samsung Electronics Co lost $12 billion in market value on Friday, hit by brokerage downgrades that have underscored concerns about slowing sales of its flagship Galaxy S4 smartphone.
The share slide of more than 6 per cent comes after it recently introduced two stripped-down versions of the S4, fanning worries that profit margins for its mobile business will suffer. It also follows a report that arch-rival Apple will begin a trade-in programme for iPhones.
The new stripped-down S4 models will help it widen its lead in the global smartphone market and fend off Chinese competitors, but some fear that the South Korean tech giant is trading in profits for volume.
Analysts say sales momentum for the high-end version of the S4, which became its fastest selling smartphone since it launch in late April, has slowed.
“Sales of high-end handsets are lagging behind expectations, while low- to mid-end handsets are selling briskly worldwide,” said Kim Young-chan, an analyst at Shinhan Investment Corp.
“As the portion of low- to mid-range handsets is expected to increase in Samsung’s overall mobile phone business, this has also sparked concerns about thinning margins and lower growth.”
Brokerage downgrades this week included a 4.8 percent cut in Samsung’s price target to 2.0 million won from Woori Securities. It cited weakening profit growth for Samsung’s mobile business, which generates around 70 percent of its total earnings.
It also cut 2013 and 2014 earnings per share forecasts by 9.2 percent and 11.7 percent respectively.
JPMorgan slashed its earnings estimates and said monthly orders for the S4 have been cut by 20-30 percent to 7-8 million from July due to weak demand in Europe and South Korea.
Among smartphone component suppliers taking a battering, camera module maker Partron tumbled 11 percent, printed circuit board maker Interflex dived 10.6 percent and camera lens manufacturer Digital Optics shed 12 percent.
Ratings agency Fitch Ratings also said on Thursday it was not planning to upgrade Samsung’s A+ rating in the medium term due to its heavy reliance on the fickle consumer electronics market, in particular handsets.
“Samsung has yet to prove its ‘creative’ innovation, that is, launching a product or a market segment that has not existed before in addition to prowess in manufacturing technology,” Fitch said.