UPDATE 2-Reuters Summit-Samsung Elec sees robust handset sales
Thu Mar 2, 2006 12:44 AM ET
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By Jean Yoon
FACT BOX
HONG KONG, March 2 (Reuters) - Samsung Electronics Co. Ltd. (005930.KS: Quote, Profile, Research), the world's third largest mobile phone maker, expects to top last quarter's record handset sales by more than 8 percent in the first quarter, a company executive said on Thursday.
Chu Woosik, senior vice president of Samsung's investor relations, said at the Reuters Global Technology, Media and Telecoms Summit that he forecast double-digit profit margins in its mobile business in the current quarter, up from 8 percent in the fourth quarter, thanks to its hot-selling slim camera phones.
He also said the price of NAND-type flash memory chips, popular in digital cameras and music players, was expected to fall less than 20 percent in the first quarter. Two weeks ago, the company had forecast a drop of slightly more than 15 percent.
Falling prices of NAND-type flash memory have been hurting shares of top NAND makers including Samsung, Toshiba Corp. (6502.T: Quote, Profile, Research) and Hynix Semiconductor Inc. (000660.KS: Quote, Profile, Research) as demand for popular MP3 music players and digital cameras cooled after the Christmas and the Lunar New Year holiday.
Asked about the mobile phone sales volume estimate for the first quarter, Chu said: "We could do little over 29.5 million." Samsung sold a record 27.2 million phones in the fourth quarter.
"The margin will go up to double digits from last quarter's 8 percent... The margin and volume will both improve in the second quarter," he said in Hong Kong.
Samsung, which trails Nokia (NOK1V.HE: Quote, Profile, Research) and Motorola Inc. (MOT.N: Quote, Profile, Research) in the mobile phone market, is likely to exceed the official handset sales target of 115 million for 2006, up from 102 million in 2005, he said.
"That could be interesting. My forecast right now is for around 29.2 million handsets in Q1," said Jae H. Lee, an analyst at Daiwa Securities.
But analysts voiced concerns over falling flash chip prices.
"Right now our expectations is that the fall in contract prices for NAND could be more than 20 percent and closer to 30 percent," said Kim Tae-hong, a senior fund manager at Mirae Asset Investment Management.
Shares in Samsung Electronics were down 0.15 percent at 686,000 won by 0522 GMT, compared with the wider market's <.KS11> 0.13 percent decline.
EVEN BETTER Q2
Chu said Samsung's first quarter for its overall business, which includes memory chips, flat screens and mobile phones, was turning out to be "quite good" and expected the second quarter to be even better.
Samsung raised its 2006 sales forecast on Tuesday, but the estimate was below market consensus and the firm said it was cautious because of the risk of higher oil prices and volatile exchange rates.
The world's top memory chip maker has been increasing its contract prices for dynamic random access memory (DRAM), used mostly in personal computers, in the last two months, and he expected the prices to be raised again in March.
Chu said the DRAM price decline would be "very moderate" this year versus last year. Average contract prices of the mainstay 256-megabit DDR (double data rate) DRAM chips, used mainly in computers, slid more than 40 percent in 2005.
As for flash memory chips, he expected prices to recover from late March or early April.
Chu also forecast a "definite improvement" in demand for liquid crystal displays (LCDs), a key component in flat LCD televisions and notebooks, in the second quarter.
LCD makers, including LG.Philips LCD Co. Ltd. (034220.KS: Quote, Profile, Research) (LPL.N: Quote, Profile, Research) and Taiwan's AU Optronics Corp. (2409.TW: Quote, Profile, Research) (AUO.N: Quote, Profile, Research), are ramping up output, raising fears about a supply glut. (Additional reporting by Rafael Nam)
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