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Samsung bullish on chip demand in 2010

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CIOL Bureau
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SEOUL, S.KOREA: Samsung Electronics, the world's top maker of memory chips and LCD screens, expects rapidly recovering demand for its premium computer memory chips and flat TVs to drive growth this year, in an ominous sign for its Japanese rivals.

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Samsung reported on Friday a 3.7 trillion won ($3.21 billion) operating profit in the fourth quarter to December, beating a consensus forecast for 3.58 trillion won profit from Thomson Reuters I/B/E/S.

The result was exactly in line with the company's own forecast earlier this month. The consolidated-basis results improved from a 0.74 trillion won operating loss a year earlier but fell from 4.23 trillion won earned in July-September.

Fourth quarter sales rose 19 per cent to 39.2 trillion won.

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South Korea's biggest company was confident demand for its memory chips and TVs would grow briskly this year, with TV demand driven by China, but warned that a rising won currency and the potential end to global stimulus measures could hurt sales.

Analysts played down the threat of the stronger won which has risen 35 per cent off its low last March. They said it would have to climb above 1000 yen to the dollar from 1158 currently to really hit sales.

"The won will be much stronger than a year earlier in terms of the average value, even if it stays at the current level this year, but this won't be a big drag on Samusung's overall performance," said Lee Min-Hee, an analyst at Dongbu Securities.

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Deepening competition in smartphones poses challenges, while Japanese TV rivals such as Sony Corp and Panasonic Corp are beefing up their line-ups to claw back market share, against Samsung's goal of selling 2 million 3D TVs this year.

However, at the same time Apple Inc's new iPad tablet computer offers a new growth opportunity for Samsung's chips.

"Semiconductors will drive Samsung's earnings this year ... Consumer fever for Apple's iPhone and new tablet product is likely to help Samsung's chip business," said Won Sang-Phil, market analyst at Tong Yang Securities in Seoul.

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Samsung, also the world's biggest TV brand and No. 2 mobile phone maker, swung to a quarterly operating profit, slightly ahead of market forecasts, as the tech sector recovery boosted chip prices and shoppers snapped up TVs and mobile phones.

Its bigger rival in mobile phones, Nokia, reported forecast-beating earnings on Thursday, while Motorola turned a small quarterly profit but predicted a loss in the current quarter.

Samsung expects to achieve a double digit profit margin in mobile phones in 2010, at least matching the 10 per cent margin it had last year.

Hynix Semiconductor Inc, No. 2 in memory chips, last week reported a higher-than-expected quarterly profit and forecast a further recovery in the sector.

Shares in Samsung shot up 77 per cent last year, well ahead of the broader market's 50 per cent gain, but underperformed in the fourth quarter on concerns about the strengthening Korean won hurting exports.

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