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Last Updated: Friday, 15 July, 2005, 12:11 GMT 13:11 UK
Samsung hit by lower chip prices
Shopper viewing a flat screen television
Samsung saw strong sales of liquid crystal display screens
Samsung Electronics, South Korea's largest firm by stock market value, saw a 46% fall in second-quarter profits on lower memory chip prices.

It made 1.69 trillion won (0.89bn; $1.63bn) in the quarter to 30 June, down from 3.13 trillion a year ago.

But analysts had expected the firm to announce lower profits of 1.63 trillion won on Friday.

Lower memory chip prices were partly offset by strong flatscreen sales and revenue fell 9% to 13.59 trillion won.

Chip crunch

The company sells two main types of memory chip: DRAM chips for computers and flash memory chips for digital cameras and mobile phones. It was adversely affected by a global oversupply of the chips.

Samsung logo and mobile phones
Year on year, sales of Samsung mobiles generated 9% less revenue

It said the price of DRAM chips halved during the quarter from $6 to $3.

"The decline in the Dynamic Random Access Memory (DRAM) chip price" was the main reason for the drop in profit, said Chang-won Chung, an analyst at Daewoo Securities in Seoul.

The overabundance of supply "should diminish" in the second half, boosting prices and helping earnings during the rest of the year, he said.

Samsung's semiconductor chip division accounts for 31% of the company's business.

Future plans

The company did not provide a forecast for the year but said it expected a better second half, traditionally a busier time for technology firms.

"In the second half of this year, both sales and operating profit will improve on the recovery in demand for IT products such as DRAM (Dynamic Random Access Memory), flat-panel display and mobile handsets," said Dr Woosik Chu, a senior vice president at Samsung.

Samsung said that sales of LCDs in the second quarter had risen 12% compared with the first quarter, and that it expected LCD prices to rebound in the second half of the year.

Hear why Samsung have refocused their resources

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