Profits Soar At Samsung, Further Growth Expected

Net income was 2.19 trillion won ($2.29 billion) on sales of 15.22 trillion won ($15.92 billion) in the third quarter ended September 30. Revenues rose 8 percent over the second quarter's 14.11 trillion won and 5 percent over the 14.54 trillion won achieved in the corresponding quarter of 2005.

The third-quarter net income was a whopping 45 percent hike over the 1.51 trillion won for the previous quarter when the net profit declined 20 percent sequentially. The third-quarter net profit also rose 16 percent over the 1.88 trillion won reported a year ago.

The company's operating profits in the July-September period also soared 30 percent quarter-to-quarter to 1.85 trillion won ($1.94 billion) from 1.42 trillion won in the second quarter but fell 13 percent from 2.13 trillion won a year before.

"Our strategy of producing high performance, differentiated products into multiple end markets allowed us to power ahead and deliver solid third quarter results amid a challenging market environment of the information technology sector," said Chu Woosik, senior vice president and head of Samsung's IR team.

Operating profits in the semiconductor business for the third quarter reached 1.27 trillion won on sales of 4.91 trillion won. Revenues were 11 percent up on the previous quarter and showed a 7 percent yearly rise. The operating profits increased 30 percent from the second quarter, mainly due to strong demand of memory chips from the PC sector, but fell 6 percent over a year earlier.

In the memories sector, Samsung capitalized on the global shortage in supply of DRAM chips that subsequently led to a surge in DRAM prices. "A timely redeployment of production from slower-growth products and strengthening higher-growth, premium products such as DDR2, enhanced profit margins by 3.7 percentage points from the previous quarter's margins of 22 percent," said Samsung in a statement Monday (Oct 16).

The company also said its memory business is expected to see further growth and higher returns in the fourth quarter, a seasonally strong period. The price of DRAM chips is predicted to remain strong in the fourth quarter, and the demand of NAND flash memory chips is expected to grow with the introduction of new products that require larger memory such as MP3s, PMPs as well as mobile phones.

In addition, migration to advanced process technologies, in particular 60-nm for 8-gigabit NAND flash technology, is expected to reduce manufacturing costs and improve profitability, the company said.

Samsung said it plans to invest an additional 1 trillion won to increase production capacity of memories.