Samsung has suffered a bigger-than-expected profit drop in the second quarter as it struggles to compete in the smartphone market.

Its pre-tax profit fell by 20.7% on the same period last year to £4.48bn.

Earlier this month, the South Korean electronics giant warned that it expected the quarter to be its worst in two years.

For the period between April and June, Samsung’s mobile business contributed around 60% to its overall profit, falling from 70% previously.

Samsung blamed slow growth in its smartphone sales – hit particularly by heavy competition from smaller rivals producing cheaper handsets.

Low-cost smartphones are currently the fastest growing part of the mobile market and Chinese companies such as Huawei and Lenovo are driving growth in global sales.

It comes as the smartphone market expanded by 23% overall.

Despite the drop, Samsung says it expects third quarter sales to pick up, as the period usually sees higher demand for consumer electronics.

But the company admitted that will also mean stronger competition.

In a statement Samsung said: “Looking ahead, the second half of 2014 will remain a challenge.”