DRAM, LCD glut hits Samsung first quarter

Samsung Electronics saw sales and profits drop in the first three months of 2005 as the result of a memory chip and LCD glut.

Samsung Electronics saw sales and profits drop in the first three months of 2005 due to a glut of memory chips and flat-panel displays, the company said Friday.

Net profits at the Seoul company, which is the world's largest memory-chip manufacturer, fell by more than half to 1.5 trillion won (US$1.5 billion as of March 31, the last day of the period being reported) from 3.14 trillion won in the same period a year earlier. Revenue totaled 13.8 trillion won, down from 14.4 trillion won a year earlier, the company said.

The results are a sharp contrast from the first quarter of last year when Samsung reported a 50 percent rise in revenues and a 178 percent rise in profits.

At the heart of Samsung's memory chip problems is a global glut in DRAM chips, which are the main type of memory chip used in personal computers.

"The average first quarter spot price has fallen by 20 percent quarter-on-quarter following a continuing drop since mid-January," said Kim Il Ung, vice president of Samsung's semiconductor business, in a conference call with analysts.

The price has been dropping as a result of a continued switch by memory chip makers to larger wafers and more advanced production technology, both of which make it cheaper to produce chips, he said.

While this adds up to bad news for chip makers, it's good news for consumers. The average amount of memory fitted into new personal computers rose to 552M bytes in the quarter, up 8 percent for the last three months of last year, said Kim.

In the flat-panel display market, increased competition pushed down panel prices. As a result, Samsung's revenues in the business fell 20 percent and profits, which dropped 97 percent, were reduced to 10 billion won.

Samsung's telecommunications unit, which includes the company's cellular telephone business, saw sales that were virtually unchanged but profits dropped by a third despite rising demand for the company's phones. Samsung's shipments totaled 24.5 million handsets during the quarter and the company blamed increased competition for pushing down prices.

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Martyn Williams

IDG News Service
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