Samsung chip, telecom profits drop in Q3

Samsung Electronics saw its operating profit drop in the third quarter of this year, compared to the same period last year, the company said Monday.

The world's biggest chip maker said revenues rose 5 percent in the July to September period to 15.2 trillion won ($16 billion ) while operating profit fell 13 percent to 1.8 trillion won. Overall net profit was 2.2 trillion won, which is up 16 percent on the same quarter last year.

Operating profit dropped in Samsung's key semiconductor and telecommunications sectors. The only positive movement was seen in the company's digital appliance business, which is one of its smallest business units, where losses narrowed by two-thirds to 10 billion won.

Profits margins were squeezed by lower prices in Samsung's big three business units. They dropped from 29 percent to 26 percent in semiconductors, from 11 percent to 5 percent in displays and from 12 percent to 11 percent in telecoms.

In the semiconductor unit, revenue climbed 7 percent to 4.9 trillion won while operating profit slid 6 percent. Demand for DRAM (dynamic random access memory) computer memory chips was strong thanks to an industrywide shortage, which Samsung said will continue through the fourth quarter. Demand for flash memory chips, of which Samsung is also a major producer, is also expected to be strong as a result of new media and MP3 players and cell phones that carry large memory.

Sales of cell phones during the quarter hit a record 30.7 million handsets and helped increase mobile phone revenue by 2 percent. Samsung said sales of its slimline "Ultra Edition" handsets were robust in the third quarter and the upcoming launch of 3G versions of the phones will help boost the average sales price in the current quarter. Overall the telecommunications business saw sales jump 3 percent to 4.7 trillion won while operating profit fell 5 percent.

The LCD (liquid crystal display) business recorded a 12 percent increase in revenue to 3 trillion won but operating profit dropped 46 percent. Demand for panels for big-screen TVs was strong. More than half of the 3 million TV panels sold by Samsung during the quarter were 40-inches or larger.

Looking at the current quarter, the period to the end of December, Samsung said it expects the launch of Microsoft's Windows Vista operating system to boost the average amount of memory fitted in new PCs by 10 percent to 930MB. Falling prices of flash memory will also boost sales of 1GB memory cards and year-end demand will mean an increase in shipments of TV display panels.

In the telecom market Samsung said it expects global shipments of cell phones to hit 950 million units this year. Samsung expects to exceed its target of 115 million units shipped in 2006, it said.