Sat, Dec 24, 2005 - Page 11 News List

Demand, cost-cutting favor Samsung

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Samsung Electronics Co, the world's largest maker of memory chips and liquid-crystal displays (LCD), said fourth-quarter profit from both products will exceed its forecast because of cost cuts and demand for televisions.

Earnings from the two bus-inesses exceeded projections made in October, Chu Woo-sik, head of investor relations at Samsung, said in an interview, without disclosing either forecast. The two products account for about 70 percent of operating profit at Samsung, which generated net income of US$11 billion last year.

Rising demand for LCD TVs in the run-up to next year's World Cup and for chips used in Microsoft's Xbox 360 video-game consoles may bolster Samsung's profits.

Results at the mobile-phone division were in line with the October estimate, Chu said. Samsung is the world's third-largest mobile phone maker after Nokia Oyj and Motorola Inc.

In October, Samsung said demand for LCDs and chips would rise in the current quarter. The company earned 1.35 trillion won (US$1.3 billion) in operating profit from chips and 300 billion won from its business making LCDs in the three months ending Sept. 30.

Profit margins from NAND flash memory chips, which are used to store pictures and songs in digital cameras and MP3 music players, will rise to the "high 40s" in the fourth quarter from the "low 40s" in the third quarter, because of better-than-expected manufacturing cost reductions, Chu said.

Production growth, measured in terms of units known as bits, and price declines for NAND were in line with company projections disclosed in October, when Samsung reported third-quarter results, Chu said.

Fourth-quarter business results from dynamic random access memory (DRAM), which is mainly used in computers, are also poised to beat October projections, led by demand for so-called "specialty DRAMs" used in graphic-focused products such as Microsoft's Xbox 360, Chu said.

DRAM-bit growth, used by analysts to gauge supply in the industry, is poised to exceed 50 percent this year, he said.

Next year's World Cup is beginning to help boost demand for LCD TVs, resulting in what Chu called "a very strong recovery overall" for LCDs and better-than-expected sales during the fourth quarter.

Fourth-quarter results at Samsung's mobile-phone business are expected to meet the company's October projections, Chu said.

After selling more than 10 million units in the last two months, Samsung, which typically ships fewer units in December to reduce inventory, "sharply" scaled back sales this month, he said.

Shipments and margins will probably rebound in the first quarter, compared with the fourth quarter, Chu said.

"Overall, the momentum we are facing is very strong now, the performance is very healthy," Chu said. "We expect this to continue on to the first half."

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