Chip Sales to Improve in Q4

Samsung Electronics to see its chip, mobile phone sales to rise in H2 and rules out hostile M&As

"Samsung Electronics will be back on track of making high profits again in the Q3 with the semiconductor chip sector showing its profit growth rapidly improving lately,"said Choo Woo-shik, vice president in charge of investor relations for the global electronics maker on Aug. 19.
The head of the IR team for the electronics maker, said the profits in the Q3 will be from two or three times larger than those in the Q2 thanks to boosts in chip prices and demand worldwide.
The IR vice president said foreign investors have a positive view on the company's plans for reorganization and the company will move ahead with its search for new growth engines through M&As, if needed.
Choo toured Hong Kong and Singapore in July to meet with over 50 foreign investors and held in-depth talks on Samsung Electronics plans and various issues including the company's strong fundamentals.
He said the profit margin on mobile phone sales would jump to the middle of 10 percent during the Q3,4. He also said the production of D-RAM chips was projected to rise sharply because the company's 15 assembly lines are being run to produce the chip, although the company planned to produce both NAND and D-RAM chips from those lines. He said if demand for NAND chips rises the assembly lines will be switched to produce NAND chips in the second half, adding that the company would not lose its technology advantage to Japanese chip makers, which are in hot pursuit of Korean chip makers.
On the operation results of the Digital Media sector, he said the company lost 150 billon won in the Q4 last year, but it has been turned around to record 300 billion won in operating profit on consolidated accounting basis for the company including the overseas sales. In the communication sector, too, its profit margin climbed to the mid 10 percent range in the H2 with the shipment of a mobile phone produced with HSDPA, the next generation technology.
On the comment that the number of foreign shareholders in the company has been falling due the lack of the company's growth momentum, he said the sluggish growth momentum in the LCD business has caused a slowdown in the company's overall growth in recent months, but the enlargement of the company's scale has also been one of the reasons. The company has been trying to find foreign investors in a number of ways around the world. Choo said Samsung Electronics enjoys a high regard by foreign investors because its restructuring of business and organization and other projects to enhance its competitive edge have won their support.
On the impact from the high appreciation of the Korean won, he said the net profit of 7.9 trillion won posted last year would be way over the 10 trillion won market if it is converted by the exchange rate of 2004 and we think the exchange rate would stay around 900 won per dollar.
The company has been riding a high tide in its operation following the foreign exchange crisis of 1998 and climbed to the top of the world's IT sector, but lately its performance in the sector has been lagging behind others. Foreign investors feel that the company should try to remove ineffectiveness from its operation, along with the effort to search for new growth areas just as the company began to move in that direction, making them very satisfied.
Choo said the operating profit in the Q3 would amount to 700 billion won at the minimum, compared to 330 billion won in the Q2, due to the recovery of chip demand and the marketing of new chips by the company, D-RAM 6F square, the technology to boost productivity of chips that only Samsung has and no other chip makers have ever attempted to develop yet.
He also said the sale of mobile phones would go over the 150 million sets targeted, more than 30 percent annual growth and the sale of flat TV sets have also been going well with more than 1 trillion won in profit projected this year. He also said the digital technology will move into the printer sector and the digital printer will rise in sales when the toner ink and other consumer equipment are sold in great volumes.
He also stressed that Samsung Electronics would not rule out M&As to find growth engines if the move is considered better than starting new businesses.
He said the company would not be affected by the subprime and yen carry financial problems because it is not in the market to borrow. Nevertheless, the company has been following the developments closely lest they would have an impact on the real economy with the subprime loan problem related to the U.S, housing market. Therefore, it is highly likely to impact the U.S. economy as a whole and the company will take it into account when drawing up business plans for next year. nw

Vice President Choo Woo-shik of Samsung Electronics Co.