According to sources familiar with the South Korean tech industry, approximately 200 managers who work for Samsung’s handset division have chosen to return a quarter of their first-half bonuses. The news comes as the smartphone giant is expected to post its worst quarterly earnings report in the past two years.
Gestures like this are not uncommon in South Korea’s corporate world, where such decisions aim to show that managers are taking part responsibility for the earnings decline. The returned bonuses will also help give a slight boost to Samsung mobile division’s profit margin. The source did not give any details on the total value of the returned bonuses, although local media reports estimate that the amount is likely to exceed 3 billion won ($2.92 million).
A large portion of Samsung’s worries appear to stem from greatly increased competition in the premium segment of the smartphone market, which is resulting in a slowdown in Samsung’s market growth. The company is facing particularly strong competition from cheaper Chinese manufacturers, such as Xiaomi, as well as Apple’s iPhone, and the other usual line-up of competitors. Counterpoint’s latest research showed that the new Samsung Galaxy S5 flagship was outsold throughout May by last year’s Apple iPhone 5.
It is worth noting that Samsung is still expected to post a substantial profit for the second quarter of the year. The company is anticipating that its Q2 operating profit will be in the region of $7.1 billion, down from $9.4 billion posted a year, a decline of 25 percent. We will have to wait to see exactly how well, or poorly, the smartphone department fared compared with last year. Samsung will announce its full earnings report for April to June on July 31st.