Samsung posts Q3 net profit, no cuts in chip output

Kim Miyoung

SEOUL: South Korea's Samsung Electronics beat expectations with a 420 billion

won ($325 million) third-quarter net profit on Monday and vowed not to cut

computer chips production despite heavy losses on semiconductors.

Samsung's net was down 75 per cent from 1.7 trillion won a year ago, but

higher than market forecasts thanks to strong sales in the telecom sector and

investment gains from profitable Samsung Group affiliates.

Analysts had forecast a net as low as 100 billion won. Memory chips costing

more to make than they sell for led to a loss of 380 billion won in earnings

before interest and taxation (EBIT) on semiconductors.

But the world's biggest memory chip maker vowed to use its size to weather

the storm. Samsung Electronics shares ended down 500 won at 169,500 won,

slightly underperforming the benchmark index which rose 0.12 per cent.

"Samsung does not see any need to cut production as output is already

shrinking, led by weaker players," said Jon Chong-hwa, an analyst at

Salomon Smith Barney.

Financially troubled Hynix Semiconductor suspended operations at its US chip

plant in July for six months. A proposed merger of chip businesses at

fourth-ranked Infineon Technologies AG of Germany and six-ranked Toshiba Corp of

Japan would also lower production for the time being, analysts said.

Capex cut



Samsung said it would tighten its belt by lowering overall 2001 capital
expenditure to 4.7 trillion won from 5.1 trillion won and analysts said it would

likely spur handset and other profitable businesses in the face of bleak chip

sector forecasts.

"Chip prices will not rebound any time soon, so how much Samsung shifts

its focus on chips to other sectors will decide whether it will see EBIT loss or

profits," said Kim Sun-hee, a chief analyst at Regent Securities. The

global market for dynamic random access memory (DRAM) chips is expected to

shrink 67 per cent this year and another 19 per cent in 2002, market research

firm Gartner Dataquest said last week.

Samsung's brisk sales of 2.5 generation mobile phones in the domestic market

have played a large role in offsetting the current downturn in chip prices. It

is the world's fifth largest producer of cellphones with 6.9 per cent global

market share, behind Nokia from Finland, Germany's Siemens AG, Sweden's Ericsson

and US-based Motorola.

"Its strategy to target the upper-middle handset market has been

effective," said Jon at Salomon. "It was also helped by its strong

brand name in consumer electronics." Samsung posted 360 billion won EBIT

from its information and communications business, helping keep its overall EBIT

from sinking into the red. It posted 18.2 billion won EBIT for the quarter, down

from 2.2 trillion won a year earlier.

Overall sales fell to 7.2 trillion won from 8.8 trillion won.

(C) Reuters Limited.