Samsung's profits from July to September dropped almost 50 percent, prompting the company to turn its focus into the production of cheaper smartphones, PC World reported.
Samsung's market shares dropped to 23.8 percent in this year's third quarter compared to last year's 32.5 percent rating.
Their net income also fell 29 percent, from last year's ₩8.2 trillion ($7.75 billion) to only ₩4.2 trillion ($3.97 billion), while their operating profits dropped 60 percent, from last year's ₩10.2 trillion ($9.45 billion) to only ₩4.1 trillion ($3.97 billion).
Samsung admitted errors in its smartphone strategy as it suffers declining business and lukewarm sales, The Australian reported. They now have plans to overhaul their handset lineup after profit from these devices hit an all time low.
Robert Yi, Samsung's head of investor relations, spoke during an earnings conference call to Seoul Thursday and admitted that the company had lagged behind changing market conditions and were apparently "not quick enough."
"Tough competition leaves some uncertainties in our smartphone business for the Q4 earnings," Yi added.
Kim Hyun-joon, the head of Samsung's mobile communications segment, also spoke at the conference and said that "high-end smartphone sales result was somewhat weak." However, Samsung was planning to "fundamentally reform our product portfolio."
News of Samsung's drop in profits comes amidst competition from Chinese rivals and how Beijing-based company, Xiaomi, has now become the world's third biggest smartphone maker, according to the International Data Corporation.
According to the preliminary data from their Worldwide Quarterly Mobile Phone Tracker released Wednesday, Samsung remains as the top smartphone maker in the world, followed by Apple, Xiaomi, and Lenovo and LG which tied for fourth place.
Despite a decline in its volume of shipments, Samsung remains at the top, while Apple announced high third-quarter profits thanks to the iPhone 6 and iPhone 6 Plus.
Xiaomi's focus on China and Asian markets resulted in a triple-digit year-over-year growth, which was the likely cause of their appearance in the top five for the first time.
Lenovo received steady gains in smartphone sales at home and abroad, while LG's focus on low-cost smartphones helped push its numbers up.
In response to lowering profits, Samsung plans to focus more on its smartphones and tablets during the upcoming holiday season, according to BCC News.
"The low-end smartphone market is still growing rapidly, and the company aims to exploit the opportunity by improving cost competitiveness," Kim said. "Samsung also aims to differentiate its high-end products with flexible displays and new materials such as metal frames."
Samsung stated that competition between smartphone manufacturing companies is "expected to further intensify" following the upcoming year-end rankings.
