Samsung sees Q1 chip revenue steady, profit down

Samsung sees Q1 chip revenue steady, profit down

Samsung expects its chip revenue in the first quarter to match the fourth quarter of last year, but profitability will slip on weaker flash memory prices.

Samsung, the world's second-largest chipmaker and a key supplier of flash memory for digital music players such as the iPod, expects its chip revenue for the first three months of the year to match that of the fourth quarter last year, but it won't be as profitable, according to an executive.

Chips account for about a third of Samsung's overall revenue, and the statement indicates that revenue will be strong, since business typically declines slightly in the first quarter compared to the fourth quarter, when holiday sales of tech gadgets boost business performance. The company's chip revenue reached $US5.44 billion during the October to December period last year.

But Samsung's first quarter operating profit at its chip division would come in lower than the fourth quarter, president and chief executive officer (CEO) of Samsung's semiconductor division, Hwang Chang-Gyu, said. He blamed the shortfall on lower prices for flash memory chips, which are mainly used to store data in MP3 music players and digital cameras.

Falling prices for flash memory chips is good for users because it often means companies will either offer more storage capacity in digital music players or lower prices, since their costs are dropping. But memory chip bargains might not last. Hwang expects demand to exceed supply in the second half of the year.

Overall growth in mobile devices and the spread of flash memory chips will also likely mean commodity memory chips, such as DRAM (dynamic RAM) and flash, will leave their volatile pricing history behind and remain on a steady track in coming years, said Hwang.

"We think the memory market will continue to grow at a steady pace," Hwang said, ensuring more stable pricing.

Samsung also said it expected to maintain over a 50 per cent share of the market for NAND flash memory this year, despite the rise of new competitors. The company's market share was over 53 per cent last year, but declined by more than 5 per cent year-on-year as new rivals joined the industry, according to market researcher, iSuppli.

The company also claims it can add to its share of the market for DRAM computer memory chips, even as it maintains strong output of flash memory chips. Samsung, the world's biggest DRAM maker, expects to grab a 33 per cent share of the global DRAM market this year, up from 32 per cent last year.

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