Samsung produces 500K RDRAM's/month!
FOCUS-Samsung doubles net in 1998
By Kim Myong-hwan
SEOUL, Feb 5 (Reuters) - Brisk sales of memory chips helped South Korea's Samsung Electronics Co more than double its net profit to 313.2 billion won ($267.5 million) in 1998 from 123.5 billion a year earlier.
Strong memory prices could allow the company to double profits again this year, analysts said.
The world's largest DRAM (dynamic random access memory) producer said on Friday its sales rose only slightly to 20.08 trillion won last year from 18.47 trillion won in 1997.
''The profit is much higher than our earlier forecast of 250 billion won,'' said company spokesman Chung Deuk-si. ''A rise in chip prices contributed greatly to profitability.''
Memory chips made up about 35 percent of the company's sales last year, he said.
Sales of wireless phone sets surged bout 80 percent to three trillion won in 1998, while exports of consumer electronics did well on the won's fall against the dollar early last year.
Chung said the company's sales volume increased even though it had shed unprofitable divisions as part of its restructuring drive to lower its debt-to-equity ratio.
The debt-to-equity ratio of Samsung Electronics, the flagship unit of the Samsung Group [SAGR.CN], fell to 198 percent at the end of 1998 from 295 percent a year ago.
Samsung sold its power device division last December to Fairchild Semiconductor for $455 million and its 45 percent stake in its joint venture with Hewlett-Packard (NYSE:HWP - news) for $36 million.
Chung said development of more sophisticated chips would help the company improve profits further.
In January, Samsung began producing 72-megabit Rambus DRAM chips, a significantly more advanced memory chip.
''We now produce 500,000 units of the Rambus chips a month. But the output will increase to five million in July,'' Chung said. ''Then the new chips will account for about 50 percent of our semiconductor sales this year.''
Chung said the company expected its sales would reach 21 trillion won to 22 trillion won this year, but refused to give profit figures.
Analysts said profits of Samsung Electronics could soar this year on the back of a continued boom in global personal computer sales, which underpin prices of memory chips.
PC sales would be buoyant throughout the year as concerns about the Y2K or millennium bug prompted replacement of old models, they said.
''Net profits of Samsung Electronics would be somewhere between 800 billion won and one trillion won this year,'' said Yook Dong-jo, analyst at Credit Suisse First Boston.
He said demand for memory chips during the early months was unusually strong this year, with the unit price of 64-megabit DRAMS hovering around $10.20/30, up from $6 to $7 last June.
''Prices of memory chips keep rising. The trend is unlikely to change soon,'' Yook said.
Tony Chung, analyst at SG Securities, said Samsung was expected to benefit from its thin-film transistor liquid crystal displays (TFT-LCDs) business.
''Samsung, a top-tier global TFT-LCD maker, is now poised to reap profits after years of heavy investment,'' Chung said.
TFT-LCD sales were estimated at $800 million in 1998, against $700 million in 1997, according to Samsung officials.
($1 equals 1,170.7 won)
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