Samsung feels the heat of Apple iPhone 6

Samsung Electronics has reported its first decline in annual profits for three years, with tumbling smartphone sales placing its market-leading position at risk.

It announced its last annual results just a day after Apple posted the biggest quarterly profit in corporate history on the back of iPhone 6 and iPhone 6 Plus sales of 74.5 million.

Analysts suggested the two companies were now likely neck-and-neck in terms of smartphone market share.

Samsung’s problem has been the lack of a groundbreaking smartphone – with much depending on the launch of its next flagship Galaxy S6 high-end smartphone due around March.

The company, which belatedly entered the market pioneered by Apple, dethroned the US firm as the world’s top smartphone vendor in the third quarter of 2011.

The South Korean electronics firm then went on to replace Nokia as the global leader in overall mobile phone sales in the first quarter of 2012.

But over the past year, Samsung’s market-leading position has been under siege from a resurgent Apple and rising Chinese rivals like Xiaomi.

Samsung said earnings from smartphones and other mobile gadgets dropped 64% annually in the October-December period to $1.8bn (£1.18bn).

It was the mobile division’s fifth consecutive quarter of decline.

Strategy Analytics executive director Neil Mawston said: “Apple’s new iPhone 6 and 6 Plus models are proving wildly popular in China, United States and Europe.

“Apple tied with Samsung to become the world’s largest smartphone vendor for the first time since Q4 2011,” he declared.

Samsung had sales of memory chips through its semiconductor division to thank for propping up its annual profits.

They came in at $4.8bn (£3.2bn) – a fall of 27% on its record profits of 2013 – with the semiconductor division’s earnings at a four-year high.

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