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Samsung Electronics Co., the world's largest computer memory chip manufacturer, Friday reported a 5 percent drop in its second-quarter profit, hit by tumbling semiconductor prices.

However, the company forecast an improving future business outlook as the prices of dynamic random access memory (DRAM) and other semiconductor goods show signs of a rebound amid increasing seasonal demand. Samsung shares surged on expectations that business will turn around in the second half.

Samsung reported in a regulatory filing that it earned 1.42 trillion won (US$1.55 billion) during the April-June period, compared with 1.49 trillion won a year earlier. The profit was the lowest for the electronics giant in four years, since the second quarter of 2003.

Revenue rose 3.7 percent year-on-year to 14.63 trillion won but operating profit plunged 35.8 percent to 910.7 billion won, the company added.

The second-quarter bottom line beats a market consensus of 1.33 trillion won. Shares of Samsung closed up 6.35 percent at 687,000 won on the Seoul bourse as investors believed its business outlook would take a turn for the better in the second half.

The company attributed the fall in quarterly earnings to tumbling prices of memory products, triggered by an industry-wide oversupply. During the second quarter alone, the price of DRAMs used in computers fell 37 percent.

Samsung reported it sold 4.26 trillion won worth of semiconductor goods in the second quarter, down 5 percent from the previous quarter. Its operating profit plummeted 39 percent to 330 billion won over the same period, it added.

However, the electronics giant said it could stem the losses from widening further by focusing on more profitable goods, which it claims resulted in an improvement in production efficiency.

"We have managed to achieve a good performance as a whole except in the memory sector, which was hit by price falls," Chu Woo-sik, Samsung's senior vice president for investor relations, said in a statement. "We expect our business to improve down the road as the chip prices seemed to have hit bottom in the second quarter."

Samsung posted relatively brisk gains in its mobile handset and flat panel divisions, offsetting the losses in the semiconductor sector.

Samsung, which trails Nokia and Motorola in the mobile phone market, sold 37.4 million units of handsets during the April-June period, up 49 percent from a year earlier, boosted by strong demand for its high-end handset lineup in overseas markets, the company said.

In the liquid crystal display (LCD) sector, Samsung sold 3.34 trillion won worth of panels, up 17 percent from the previous quarter. Its operating profit quadrupled to 290 billion won and its operating margin also improved to 9 percent, three percentage points higher than the previous quarter.

Analysts say that Samsung's profitability is expected to get better in the second half since the outlook for its core business divisions is gradually improving.

"The main drag in the second quarter for Samsung was sliding semiconductor prices," said Park Young-ju, an analyst at Woori Investment and Securities.

"As chip prices seem to be stabilizing and the business environment for the handset and display divisions is also improving, Samsung will very likely see a turnaround in profitability in the latter part of the year," he added.
SEOUL, July 13 (Yonhap New)