Samsung said that smartphone shipments "increased marginally"; however, profit margins declined due to lower prices and higher marketing expenses.
The company is facing increased competition at the high-end from the new Apple iPhone 6 and iPhone 6 Plus which have larger screens, previously a distinguishing feature for its devices. The company is also facing intense competition at the low-end from Chinese handset makers.
Samsung's third quarter included just twelve days of iPhone 6 sales and analysts expect the impact of the new Apple smartphones to be even larger in the fourth quarter.
Nomura analyst C.W. Chung says that without essential differentiators like Apple's design cachet and a software ecosystem, Samsung is headed toward becoming a maker of commoditized hardware. Chung predicts that its operating margins for handsets and tablets will decline to 11% in 2016 from 21% in 2013.