Samsung Sees Big Profit Increase
(09/03/99, 7:29 a.m. ET)
By Reuters
The world's top memory chip maker
Samsung Electronics Co said on Friday
strong chip prices will give a big boost to
profits, which analysts said could reach
nearly $2.5 billion in 1999.
''The 64-megabit DRAM price rose across $10
yesterday on the spot market and (the strong price)
would give a considerable boost to our profit for the
coming period,'' Samsung spokesman James Chung
told Reuters.
The 64-megabit dynamic random access memory chips
are the current mainstay in the world market and the
biggest contributor to the South Korean company's
business.
Analysts said the current price, compared with around
$8 early this year and a low of $5.6 for the year, was
attributable to a blackout in Taiwan and a ''free PC''
boom in the personal computer industry.
''The Taiwan blackout has reduced the world DRAM
supply by some two percent, which was an important
factor in the DRAM industry which is sensitive to
supply and demand situation,'' said Shim Yong-jae, an
analyst at SG Securities.
Taiwan's key industries were temporarily paralysed in
late July by a power blackout and damage inflicted on
semiconductor and other electronics makers has been
estimated at more than $62 million.
Analysts said the chip price strength could also be
attributable to increasing demand for personal
computers under the spreading ''free PC'' marketing
strategy of providing free PCs to people who sign up
for Internet access.
''At first we thought the price rise was due to a
temporary shortage in supply resulting from a blackout
in Taiwan and from a temporary fall in yield due to
attempts by makers to introduce new shrinkage
technology,'' Samsung's Chung said.
But the price strength proved to be more cyclical and
the upbeat trend is now expected to hold on for the
time being, he said.
''In terms of annual profit, a $1 rise in the price usually
raises our profit by about $300 million,'' he said. But he
declined to give a forecast for the company's profit.
He had earlier said the company's after-tax profit for
calendar 1999 was expected to top 2.7 trillion won
($2.3 billion), compared with 313.2 billion won in profit
for 1998.
Analysts said they were upgrading their earnings
forecasts for Samsung Electronics to somewhere near
three trillion won.
News of the strong upturn in chip prices cheered
investors on the Korea Stock Exchange, lifting share
prices of all the three South Korean memory chip
makers.
The three makers took a combined share of 37.9
percent on the world DRAM market in 1998 sales,
with Samsung alone accounting for an 18.6 percent
share.
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