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Strong chip demand boosts Samsung Electronic's profits

Samsung Electronics Co said yesterday that its third-quarter net profit had recovered to the level hit a year earlier on brisk demand despite low semiconductor prices.

The South Korean firm said its net profit for the July-September period stood at 2.19 trillion won (US$2.39 billion), about the same as a year earlier.

Operating profit was 2.07 trillion won, up 12 percent from the same period of last year, and up 127 percent from the previous quarter.

"The third-quarter results are strong enough to dismiss concerns over the purportedly weakening competitiveness of Samsung Electronics," said Chu Woo-sik, Samsung's senior vice president for investor relations.

He said all businesses of the company performed well thanks to their "high product quality and cost competitiveness."

"Our results demonstrate strong fundamentals throughout the company, with earnings expected to continue trending upward as the fourth quarter brings greater demand for mobile phones and LCD TVs," he said.

The stronger-than-expected results sent Samsung Electronics shares up as much as three percent in early trade but concerns over weakening memory chip prices and the performance of the LCD business pared back those gains.

The shares closed at 557,000 won, up 0.36 percent, outperforming a 1.57 percent decline of the overall main index.

"These are very good results beyond earlier expectations," Hyundai Securities analyst Kim Jang-yol said. "Shipments did not grow so much but the cost structure was good."

Samsung plans to increase this year's investment in production facilities to 6.84 trillion won, up 26 percent from an initial proposal.

"The increase reflects our high confidence in business prospects," Chu said, adding an additional 1 trillion won would be ploughed into its fabrication plant in Texas.

The company drew a rosy picture for the next quarter, but some analysts disagreed.

Kim Young-jun, an analyst at Daishin Securities, said that DRAM prices were continuing to fall in the fourth quarter as prices of NAND flash memory chips were expected to remain weak for a while.

"This will serve as a drag on the bottom line of Samsung," he said.

"Samsung will continue to face falling memory prices as global chipmaking giants including Hynix and Toshiba are showing little sign of cutting investment in memory production," Kim Jee-soo, an analyst at Goodmorning Shinhan Securities, told Yonhap news agency.
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