Samsung upbeat on chip outlook despite price cuts

SEOUL (Reuters) - Samsung Electronics Co Ltd expects prices of its core computer memory chips to stabilise in the second half of 2006 and said lower flash chip prices would boost demand.

The world's top memory chip maker and third-largest mobile phone producer also said it expected its handset sales to grow up to 20 percent to 120 million phones in 2006 but maintain its average selling prices.

Samsung aims to double its annual sales in the next five years by extending its leading position in memory chips and flat screens into other products, Yun Jong-yong, Samsung Electronics' chief executive told analysts on Thursday.

"DRAM (dynamic random access memory) chip prices have been falling at an average rate of 30 percent in the past few years, but this year's drop will be sharper than that," Hwang Chang-gyu, president and chief executive of Samsung's semiconductor division, told reporters after a meeting with analysts.

"But they will turn steady in the second half of next year, while flash chip prices would maintain an average 40 percent fall as had been expected before," he said, referring to the price outlook for 2006.

The world's most valuable technology firm outside of the United States has been holding down flash chip prices to woo more electronics manufacturers to use them and said on Thursday it would go on slashing prices aggressively to expand market share.

In mid-October, a Samsung executive forecast flash chip prices would fall 19-20 percent in the fourth quarter from the preceding quarter, a similar drop to the third quarter.

"There had been worries over a huge oversupply of DRAM chips in the first half of next year, but it's going to get better in the second half," said Kim Yung-min, an equity strategist at Korea Investment Trust Management.

"In terms of NAND flash chip prices, demand could get bigger. People are regaining confidence in tech shares."


Double sales

Samsung, which competes with local rival Hynix Semiconductor Inc, Micron Technology Inc and German chip maker Infineon Technologies AG in the computer memory chip market, aims to boost its semiconductor sales by more than three-fold to US$61 billion by 2012 from US$17.5 billion last year, it said in a statement.

In NAND flash memory, Samsung competes with Japan's Toshiba Corp.

Samsung aims to raise annual sales to more than double 2004's 57.6 trillion won (US$55.3 billion) by 2010 and to become one of the top three electronics makers in the world by then, CEO Yun said.

Lee Ki-tae, chief executive at Samsung's telecommunications division, told reporters Samsung expected to ship more than 120 million phones in 2006 from this year's target of 100 million, which is 16 percent higher than 86.5 million phones sold in 2004.

But a Samsung spokesman later told reporters 115-120 million was a more appropriate target for 2006.

Samsung is the world's number three handset maker after Nokia and Motorola Inc.

"Our average selling prices have fallen slightly from the previous year, which is a bit of a concern, but we aim to keep prices at current level by focusing on high-end models," Lee said.

For 2006, Samsung expects its net profit to top this year's earnings, amid an improving business environment and as the company raises efficiency, Yun told Reuters on the sidelines of the meeting. That was in line with analysts' expectations.

Full-year net profit at Samsung is forecast at 7.23 trillion won in 2005 and 9.09 trillion won next year, down from a record 10.79 trillion won in 2004, according to Reuters Estimates.

Samsung, the world's biggest flat screen maker, also aims to more than double its liquid crystal display (LCD) sales to US$20 billion by 2010 from US$8.4 billion in 2004.

For digital media division that includes sleek LCD-based TVs, the technology giant aims to ring up US$30 billion sales by 2008 versus US$7.7 billion in 2004.

Additional reporting by Kim Miyoung and Rafael Nam.

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