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Samsung Profit Jumps After Rebound in Chip Prices


Samsung Electronics Co., the world’s biggest buyer of chip- and display-manufacturing equipment, said it will “substantially” boost spending after profit jumped almost sevenfold to a record.

The spending increase will focus on semiconductors and flat panels, Robert Yi, head of the company’s investor relations, said in a conference call today. The world’s largest maker of memory chips and liquid-crystal displays can’t currently specify how much higher spending will be from the 8.5 trillion won ($7.7 billion) projected in January for the two businesses, Yi said.

Samsung forecast profit, which exceeded that of rival and iPhone-maker Apple Inc. in the latest quarter, will probably rise in the current period on sales of chips, flat-screens, televisions and mobile phones. Asia’s biggest electronics maker joined Intel Corp. in predicting a revival in demand for products ranging from TVs to personal computers.

The likelihood of increased spending “reflects a confidence in demand,” said Chang In Whan, president of Seoul- based KTB Asset Management Co., which manages the equivalent of $10 billion in assets. “I think overall the company will post stronger earnings than we previously anticipated.”

Samsung, which climbed 77 percent last year, rose 3 percent to 850,000 won at 1:18 p.m. in Seoul trading, leading a 1 percent gain in the benchmark Kospi index. The shares have climbed 6.4 percent this year, compared with the 3.7 percent advance by the Kospi.

Net income jumped to 3.99 trillion won in the first quarter, from 582.2 billion won a year earlier. Sales, including those of overseas affiliates, increased 21 percent to 34.6 trillion won.

Original Spending Plan

Samsung said in January it plans to spend 5.5 trillion won in capital investment on semiconductors this year, compared with 4.5 trillion won in 2009, and about 3 trillion won on LCDs. That’s more than what Intel and Taiwan Semiconductor Manufacturing Co. are planning to invest.

“We will continue to widen the gap with competitors in the memory business, improve profitability in the LCD business, and strengthen our competiveness and market dominance in the handset and TV businesses,” Yi said in a statement.

Kwon Oh-Hyun, head of Samsung’s chip operations, said March 16 his division will decide on the spending budget during the second quarter.

Operating profit, or sales minus the cost of goods sold and administrative expenses, jumped to a record 4.41 trillion won from 593 billion won, Samsung said.

IFRS Accounting

The year-earlier results were revised following Samsung’s adoption of International Financial Reporting Standards from this year, the company said.

Analysts predict Samsung’s earnings growth will probably extend until the third quarter, while higher memory-chip and flat-panel prices will help the company post record profit in 2010.

Profit at Samsung’s semiconductor division was 1.96 trillion won, compared with a loss a year earlier, as prices rose. Micron Technology Inc. and Hynix Semiconductor Inc., which compete against Samsung in computer memory, both reported quarterly profit that beat analysts’ estimates. Intel, the biggest chipmaker, this month forecast record profit margins for 2010 and said sales will rise this quarter.

Samsung, the world’s largest maker of computer-memory chips, said last month it expects prices to remain “stable” in the second half of the year, buoyed by strong demand.

Flat Screens

At the flat-screen business, Samsung reported a profit of about 490 billion won, compared with a year-earlier loss, driven by higher TV demand. LG Display Co., the second-largest liquid- crystal display maker after Samsung, last week reported its fourth straight quarterly profit after prices increased.

Prices of most panels used in computer monitors, notebooks and TVs rose in the second half of March from a year earlier, according to Taipei-based researcher WitsView Technology Corp.

Panel prices will probably remain flat in the current period and rebound in the third quarter, James Kim, an analyst at Nomura Holdings Inc., wrote in a report this month. A shortage of components for LCDs will continue throughout this year, which will help limit supply growth, he wrote.

Profit at Samsung’s digital media division, which makes TVs, rose by about 10 percent to 520 billion won as the company increased sales of more expensive models using light-emitting diodes as screen backlights.

Global shipments of LCD TVs may rise 24 percent to more than 180 million units in 2010, Austin, Texas-based DisplaySearch said last month.

TV Demand

Samsung, the world’s largest TV maker, said in January it expects to sell 35 million LCD sets this year. LG Electronics Inc., the second-ranked TV maker, this week reported a first- quarter profit after LCD TV shipments increased 62 percent to 5.2 million sets.

The telecommunications division was Samsung’s only major business that posted a profit drop as the world’s second-largest mobile-phone maker lagged behind Apple and Research In Motion Ltd. in the growing smartphone market.

While shipments climbed 40 percent to 64.3 million, profit dipped to 1.1 trillion won from 1.12 trillion won. Samsung has said it plans to triple shipments of smartphones this year from 6 million in 2009.

Nokia Oyj, the world’s biggest maker of mobile phones, last week cut its margin forecast and LG Electronics this week reported earnings at the handset division fell 89 percent because of competition from iPhones and Blackberrys. Apple said last week its quarterly iPhone sales more than doubled and profit increased 90 percent.

Worldwide sales of smartphones will increase 36 percent to 247 million in 2010 and expand 30 percent next year, ISuppli said last month. The total mobile-phone industry shipments will probably rise 11 percent to 1.28 billion units this year, according to ISuppli.