Samsung Electronics Co, the world's largest memory chipmaker, said yesterday that second-quarter profit fell 46 percent, largely due to a sharp drop in prices for computer chips.
The company, South Korea's biggest company by market capitalization, said it earned 1.69 trillion won (US$1.63 billion) in the three months ended June 30, down from 3.13 trillion won (US$3 billion) in the same period a year earlier.
The second-quarter result slightly exceeded expectations. A survey of 10 analysts by Dow Jones Newswires showed Samsung's profit would total 1.63 trillion won (US$1.58 billion).
Prices for Samsung's mainstay businesses -- chips, mobile phones and liquid crystal displays used in computer monitors and televisions -- peaked in the first half of last year. Profit margins have since been eroded by an oversupply of dynamic random access, or DRAM, chips and LCDs, and stiffer competition in the mobile phone business.
Samsung said its average DRAM selling price fell by almost half during the quarter to the high US$3 level from the high US$6 level in the same period last year.
"The decline in the DRAM chip price" was the main reason for the drop in profit, said Chung Chang-won, an analyst at Daewoo Securities in Seoul. The overabundance of supply "should diminish" in the second half, boosting prices and helping earnings the rest of the year, he said.
Sales during the quarter fell 9 percent to 13.59 trillion won (US$13.1 billion) from 14.98 trillion won (US$14.5 billion) a year earlier.
In an early sign of a possible turnaround in outlook, Samsung's net income increased 13 percent from the previous quarter, while sales declined 2 percent. Operating profit, or sales minus the cost of goods sold, fell 56 percent to 1.65 trillion won from the year before and 23 percent from the previous quarter.
The Seoul-based company didn't offer a full-year forecast, but officials expressed optimism about the future.
"Samsung Electronics anticipates improvements in both sales and operating profits in the second half of 2005," Senior Vice President Chu Woo-sik said in a release, citing an expected increase in demand in the technology industry.
Samsung is the biggest producer of DRAM and NAND flash memory chips in the world. It is also one of the largest makers of LCDs along with domestic rival LG.Philips LCD Co.
DRAM chips are most widely used in personal computers, while NAND flash chips are used in electronic devices such as MP3 players and digital cameras.
Samsung said growth in its liquid crystal display and digital appliance businesses helped support sales in the second quarter amid price declines for some of its mainstay products, including memory chips.
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