• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Chips Down at Samsung As Profits Slide 30 Per Cent

Posted on: Friday, 14 October 2005, 15:00 CDT

By Katie Emslie

SAMSUNG, the world's biggest memory chip maker, today announced a 30 per cent slide in profits to GBP 1 billion on the back of lower prices.

But despite the downturn in quarterly earnings, the South Korean electronics giant forecast a Christmas recovery driven by consumer demand for flashier mobile phones and sleek flat screens.

The world's most valuable technology firm outside the United States also predicted a continuing reduced supply of liquid display crystals (LCDs) in the quarter, which it said would push up the price of wider screens for televisions.

Today's results came as Samsung agreed to pay a GBP 170 million fine after admitting to price fixing in the US.

The case concerned the pricing of dynamic random access memory (DRAM) chips, the most common type of semiconductors.

The size of Samsung's fine makes it the largest criminal anti- trust penalty for five years, and the second largest in US legal history.

Samsung had stood accused together with other chip manufacturers of conspiring between 1999 and 2002 to fix the prices of chips to be used in mobile phones and PCs.

Its decision to plead guilty followed fellow South Korean firm Hynix, which agreed to pay a fine of some GBP 103m, and German chipmaker Infineon which reached a settlement of about GBP 91.2m.

Chu Woosik, Samsung's senior vice president, said: "We expect better results in both top and bottom lines in the fourth quarter," predicting strong seasonal demand for new electronic goods would fuel end of year sales.

Samsung hopes the introduction of new high-end models in the near future will enhance profit margins for its mobile phone division in the first quarter of 2006.

And the 2006 earnings outlook for the world's biggest flat- screen manufacturer had been heightened by buoyant demand for flash memory chips used in fast-selling digital cameras and music players.

In addition, personal computer sales and lower chip prices would continue to boost the company's sales.

Chang In-Whan, chief executive of KTB Asset Management, said: "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. Lower prices of panels and chips will boost demand, especially for digital TVs."

However, a pessimistic note was struck in relation to the price outlook for computer memory chips, which fell by just under five per cent in the current quarter, compared with three per cent during the third.

In a statement regarding the US anti-trust case, Samsung said that provisions to cover costs related to the investigation were reflected in third quarter earnings.

Saying that the price-fixing charges were now "fully resolved", the statement added: "Samsung strongly supports fair competition and ethical practices and forbids anti-competitive behaviour."

The Facts

Roots: Samsung was formed in 1938 by Byung-Chull Lee and has grown from a domestic industrial leader into a global consumer electronics powerhouse. At first, the business was primarily in trade export, selling dried Korean fish, vegetables and fruit. Now, its electronics affiliates develop, market and sell a broad range of electronic parts and components.

Sporting links: As a worldwide Olympic partner in the wireless equipment sector for the 2000 Sydney Olympics, Samsung provided 25,000 advanced digital wireless telecommunication devices. This association will continue next year with its role as official wireless communication partner for the Winter Olympics in Turin.

Corporate identity: The elliptical logo shape symbolises the world moving through space.

Source: Evening News; Edinburgh (UK)

More News in this Category