Samsung Electronics saw sales and profits drop in the first three months of 2005 due to a glut of memory chips and flat-panel displays, the company said.
Net profits at the world's largest memory-chip manufacturer fell by more than half to 1.5 trillion won ($US1.5 billion as of March 31) from 3.14 trillion won in the same period a year earlier. Revenue totalled 13.8 trillion won, down from 14.4 trillion won a year earlier, the company said.
The results are a sharp contrast from the first quarter of last year when Samsung reported a 50 per cent rise in revenues and a 178 per cent rise in profits.
At the heart of Samsung's memory chip problems is a global glut in DRAM chips, which are the main type of memory chip used in personal computers.
"The average first quarter spot price has fallen by 20 per cent quarter-on-quarter following a continuing drop since mid-January," said Kim Il Ung, vice president of Samsung's semiconductor business, Kim Il Ung, said.
The price has been dropping as a result of a continued switch by memory chipmakers to larger wafers and more advanced production technology, both of which make it cheaper to produce chips, he said.
While this adds up to bad news for chipmakers, it's good news for consumers. The average amount of memory fitted into new personal computers rose to 552M bytes in the quarter, up 8 per cent for the last three months of last year, said Kim.
In the flat-panel display market, increased competition pushed down panel prices. As a result, Samsung's revenues in the business fell 20 per cent and profits, which dropped 97 per cent, were reduced to 10 billion won.
Samsung's telecommunications unit, which includes the company's cellular telephone business, saw sales that were virtually unchanged but profits dropped by a third despite rising demand for the company's phones. Samsung's shipments totalled 24.5 million handsets during the quarter and the company blamed increased competition for pushing down prices.