Samsung Electronics profit streak hits snag

Disappointing Q3 prediction reflects slowing chips, LCDs

By Kim Yoo-chul

Samsung Electronics is expected to post a lower-than-expected 4.8 trillion won (about $4.3 billion) operating profit in the third quarter of this year due to sluggish sales of semiconductors and liquid crystal display (LCD) screens.

Announcing its earnings guidance for the July-Sept. period, the company estimated its revenue at around 40 trillion won, a fresh quarterly high that would represent an 11.5 percent increase from a year earlier.

Samsung’s operating profit estimate for the third quarter represents a 13.7 percent increase from last year’s 4.22 trillion won but a 4.19 percent decline from the previous quarter.

Samsung, which is distinguished by its dual strength in both parts and finished products, appears to have been affected by increasing competition in semiconductors and LCDs, which were behind its record-breaking profit streak in the first half of the year.

Samsung is the worlds’ largest provider of computer memory chips and LCDs and also the leading brand in flat-screen televisions. However, it trails Nokia in mobile phones.

Oversupply is becoming an increasing concern in chips and LCDs, where rivals have been flexing their muscles after weathering the recent economic downturn. Demand for the components has been shaky due to uncertainties that are zapping the energy out of the consumer electronics industries in Europe and North America.

Computer chips and flat-screen divisions generated around 75 percent of Samsung’s operating profit in the second quarter.

LCD panels are used for TVs, monitors, computers and mobile phones, while memory chips are used in computers, portable multimedia players and other digital devices.

Samsung’s consolidated sales for the first nine months of the year will total 112.5 trillion won with an operating profit of 14.22 trillion won. Samsung had been targeting 150 trillion won in sales for 2010.

“The earnings guidance, which is based on International Financial Reporting Standards (IFRS), may differ from the company’s finalized earnings as Samsung is still in the process of completing an audit,” said spokesman Kim Nam-yong.