Samsung Electronics said Thursday its net profit fell 26.7 percent in the fourth quarter of 2014 from a year earlier, dampened by sluggish smartphone sales. Net income came to 5.35 trillion won (US$4.93 billion) in the October-December period, compared with 7.3 trillion won the previous year, the company said in a regulatory filing. Operating profit dipped 36.4 percent on-year to 5.29 trillion won.

Sales slid 11 percent to 52.7 trillion won over the cited period.

The South Korean giant said earnings from smartphones and other mobile gadgets dropped 64 percent annually in the October-December period to 1.96 trillion won ($1.80 billion), contributing to its first annual earnings fall in three years.

In contrast, rival Apple reported record-breaking 74.5 million iPhone sales in the three months to Dec 27 on the back of the success of its big-screen iPhone 6 and 6 Plus.

Obviously Samsung is under immense pressure to hang on to its market share, with a lot resting on the launch of its next flagship Galaxy S6 high-end smartphone due around March. The device will likely to use Samsung's Exynos mobile processor.

Samsung said smartphone and tablet shipments declined in the fourth quarter.

The company expects shipments and average selling prices for handsets to pick up in the first quarter following the launch of new mid-tier models like the Galaxy A.

On the other hand, Samsung puts hopes in its semiconductor division, which posted fourth-quarter operating profit of 5.3 trillion won ($4.88 billion), in line with the 5.2 trillion won profit the firm guided for earlier this month.

The semiconductor division's profit stood at 2.7 trillion won, its highest in more than four years, helping Samsung recover from a 60 percent drop in operating profit in the third quarter.

The display panel business also contributed to the favorable performance in the quarter. Samsung said it has generated 470 billion won operating profit in the quarter, up 783 percent from a quarter ago.

Samsung Display Vice President Lee Chang-hoon said, "We plan to operate manufacturing line for flexible organic light-emitting diode display panels by the second quarter of this year to meet the demand for flexible smartphones."

For all of 2014, the tech giant booked a net profit of 23.4 trillion won, down 23.2 percent from a year ago. The operating profit fell 32 percent to 25.0 trillion won last year.

Overall sales also slid 9.9 percent to 206.2 trillion won.

Samsung said its System LSI sector, which involves making application processors for mobile devices and foundry businesses, will be a driver for growth in 2015, as the company is ready to ramp up production of the 14-nano FinFET technology, a 3-dimensional chip used in mobile devices.

The company said that it will work to provide more LPDDR4 memory chips for all Samsung premium smartphones and will provide its 14-nanometer Exynos mobile processors for not only Samsung smartphones but also for other handset makers.