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Samsung likely to report profit decline

Seemingly inevitable * Analysts believe that Samsung Electronics will probably earn 2.9 trillion won for the full year. * Samsung said its net income fell 45 percent in the second quarter to 880 billion won. * The company's rivals, such as Micron Technology and Hynix Semiconductor, have all reported losses for at least two quarters.

Samsung Electronics Co may report its third-quarter net income halved from the preceding three-month period, as weak demand hurt the main business of the largest memory chipmaker.

Samsung, which also makes home appliances and personal computers, will probably earn 2.9 trillion won (US$2.2 billion) for the full year, according to the average estimate of 24 analysts surveyed by IBES International Inc. That indicates the company will have to earn about 410 billion won in each remaining quarters, having earned a profit of 2.1 trillion won in the first half of the year.

Analysts do not predict quarterly earnings for South Korean companies and the companies do not make forecasts. Samsung will release its July to September figures on a conference call with analysts today before making a presentation at the Korea Stock Exchange at 4pm local time.

"DRAM manufacturers should be afraid of the future," said Hwang Min Seong, an analyst at ABN Amro securities in Seoul who forecast the company lost money on its semiconductor operations in the third quarter. "In the past demand was steady and supply caused the booms and busts, this time demand is coming down."

Samsung said its net income fell 45 percent in the second quarter to 880 billion won. In the third quarter last year, the company posted a record quarterly income of 1.7 trillion won.

Analysts forecast the company will post a positive net income for the third quarter this year on non-operating profits from Samsung-group affiliates in which it owns stakes.

Samsung is poised to become the last maker of dynamic random access memory, or DRAM, chips, to have to report losses from selling them for less than they cost to make. Its rivals, such as Micron Technology Inc and Hynix Semiconductor Inc, have all made losses for at least two quarters.

On Friday, Hynix said it lost US$1.3 billion in the third quarter.

Worldwide sales of dynamic random access memory chips may fall 67 percent by value this year as the global economy slows and consumer confidence was hurt by last month's terrorist attacks, said Dataquest Inc., a research firm.

The spot price of the chip used as a benchmark by investors, the 64-megabit P133, fell to US$0.59 yesterday and has been trading since May at less than the US$1.50 level that analysts estimate chips cost to build. The price fell 78 percent this year.

Samsung, which has 21 percent of the DRAM market, made a profit in the first quarter by shifting production to those memory chips that others no longer make or are unable to produce. The strategy allowed Samsung to charge higher prices.

Now demand for those chips has fallen too.

When it announced its most recent results in July, Samsung executives said that their strategy for the rest of the year would be to limit losses.

For the first time last quarter, the company said telecommunications products -- mobile phones and phone systems -- overtook semiconductor products in sales and profits.

Sales from telecommunications were 2.3 trillion won, with operating profit of 300 billion won, the company told analysts during a conference call. Sales from the semiconductor business were 2.2 trillion won, with an operating profit of 260 billion won.

Still, Samsung's other units -- the world's largest maker of liquid crystal displays and Korea's largest home-electronics maker -- are also suffering.

Prices of the flat display panels used as computer displays and televisions have slumped this year as demand for personal computers and home electronics fell. Samsung said on average the price of the industry-standard 15-inch screen has fallen more than 40 percent this year.
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