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 percent 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.
Samsung unveils new Galaxy S4 'Mini'
"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."
Apple will start a programme this month to allow users to trade their older iPhones for the newest model, Bloomberg news agency cited people familiar with the plan as saying, a first for the company as it prepares to introduce a new version of the smartphone.
"With Apple widely expected to announce an older iPhone trade-in programme and also a new cheaper iPhone, overall growth prospects for (Samsung's) smartphone business have dimmed," said Kim Hyun-yong, an analyst at E*trade Securities.
Apple hints at a cheaper version of the iPhone
"Second-quarter results will be solid but we have to see whether the trend can be sustainable going forward."
Shares in Samsung finished down 6.2 percent at their lowest level in four months, wiping out 14 trillion won of value to bring its market cap to 210.2 trillion won.
It was their biggest daily percentage drop since late August when the stock tumbled more than 7 percent following a U.S. jury verdict that it infringed on Apple's patents.
Apple's gain, Samsung's loss
Samsung, which represents nearly 20 percent of the main bourse's market value, helped send the main stock index 1.9 percent lower, while suppliers of smartphone components were also hammered.
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.