Samsung Electronics Co Ltd reported a 30 percent drop in quarterly profits on Friday on lower memory chip prices, but forecast a recovery on brisk demand for sleek flat screens and pricier mobile phones.
The world's top flat screen and memory chip maker forecast a supply shortage of liquid crystal displays (LCDs) to persist in the current quarter and demand for its computer memory chips to get a boost from strong PC sales and lower chip prices.
"Samsung's LCD and chip business will recover steadily thanks to growth in the global IT sector next year, though the pace will be slow," said Chang In-whan, chief executive at KTB Asset Management. "Lower prices of panels and chips will boost demand, especially for digital TVs."
Buoyant demand for flash memory chips, used in hot-selling digital cameras and music players, has boosted its earnings outlook for 2006, offsetting continuing price pressure on dynamic random access memory (DRAM) chips.
Samsung hopes the launch of new high-end models in coming months will improve profit margins for its cell phone division in the first quarter of 2006.
Average contract prices of the mainstay 256-megabit DDR (double data rate) DRAM chips tumbled 40 percent by the end of September from a year ago, analysts said.
Samsung earned 1.88 trillion won ($1.80 billion) in net profit for the third quarter, in line with analysts' forecasts.
Third-quarter earnings reflected provisions set aside to cover costs related to US antitrust body's investigation into the price-fixing of memory chips, the company said in a statement. It has agreed to plead guilty to the charge and pay a $300 million fine, US antitrust authorities said on Thursday.
The earnings were down from 2.69 trillion won a year ago, but up 11 percent from the previous quarter's 1.69 trillion. Sales were 14.54 trillion won versus 14.34 trillion a year ago.
"We expect better results in both top and bottom lines in the fourth quarter," senior vice president Chu Woosik said in a conference call with analysts, citing strong seasonal demand at year end for new electronics goods.