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Falling prices eat away at Samsung

Samsung Electronics Co, the world's largest computer-memory chipmaker, forecast sales growth that missed analyst estimates amid falling semiconductor prices.

Revenue would probably rise 10 percent this year, chief executive officer Yun Jong-yong said at Suwon, South Korea-based Samsung's annual shareholder meeting in Seoul yesterday.

The forecast compares with the average 14 percent growth among 30 analysts' estimates compiled by Bloomberg since Jan. 15.

Yun said profitability in the semiconductor industry was "deteriorating," suggesting slower gains in sales from the chip business may undermine record revenue from flat screens and handsets.

High oil and commodity prices may lead to a difficult operating environment this year, Yun said.

"The semiconductor business will hold the key for earnings this year," Seo Won-seok, an analyst at NH Investment & Securities Co in Seoul, said by telephone. "There's a possibility of another industry downturn in the fourth quarter. Still, Samsung's other businesses will do well."

Seo has a "buy" rating on the company.

Prices for benchmark dynamic random access memory (DRAM) chips have remained at record low levels this year after slumping 85 percent last year, according to Dramexchange Technology Inc, Asia's biggest spot market for semiconductors.

Samsung's net income this year would probably exceed last year's 7.4 trillion won (US$7.5 billion), Yun said, without providing details. That compares with analyst expectations of 8.8 trillion won.

Profit from liquid-crystal displays would probably increase more than 10-fold from a year earlier for the quarter ending March 31, while earnings from mobile phones would also rise because of higher demand, analysts at Goldman Sachs Group Inc and Hyundai Securities Co said this month.

Sales from the semiconductor division would probably climb 12 percent this year, less than the growth for the flat-screen and phone businesses, according to Goldman Sachs.

Last year, Samsung posted sales of 63.2 trillion won, a 7.1 percent increase from a year earlier.

Including overseas subsidiaries, Samsung's revenue rose 12 percent to 96.1 trillion won last year. The firm forecast in January that sales on this basis would probably increase at least 15 percent this year.

"We plan to focus on expanding into emerging markets and boost our competitiveness in all of our main businesses," Yun said.

Samsung rose 1.3 percent to close at 613,000 won in Seoul trading. The shares have climbed 10 percent this year, beating the performance of the benchmark Kospi index, which dropped 10 percent.
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