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September 11, 2006 11:32 am

Samsung forecasts record chip revenues

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Samsung Electronics, the world’s largest memory chipmaker, on Monday forecast record revenue from its semiconductor business in the current quarter, helped by strong D-ram prices.

Hwang Chang-gyu, president of Samsung’s semiconductor division, told a news conference that he expected prices of D-ram chips used in personal computers to continue rising until the end of this year.

He said Samsung was able to supply only 70 per cent of D-ram orders to major customers due to strong demand, and a shortage was likely to continue throughout next year, with Microsoft’s launch of its new Windows Vista operating system in early 2007 likely to further boost PC and memory sales.

“We expect to report the biggest-ever quarterly sales in the semiconductor division in the third quarter, and the momentum is likely to continue in the fourth quarter,” Mr Hwang said, without giving figures.

The previous high for Samsung chip revenues was Won5,090bn ($5.3bn) in the fourth quarter of 2005.

“D-ram prices are rising faster than expected this month, lifting profitability. That will more than offset lacklustre performance in the flash memory business,” said Kim Young-joon, an analyst at Daishin Securities.

Market researcher iSuppli said last week that inventories at D-ram makers had dropped to their lowest level in 20 months due to rising back-to-school PC demand.

Mr Hwang forecast the global D-ram market to grow from $28bn in 2006 to $36.4bn in 2008 as the planned release of Windows Vista further increases demand.

He added that Samsung was trying to increase market share by accelerating mass production of D-rams using 80-nanometre process technology.

He remained optimistic about the semiconductor business in general, predicting a continued increase in demand for high-density memory chips designed to store mass data amid the increasing trend of mobile convergence.

He said prices of Nand flash memory chips used in digital cameras and mp3 players would stabilise in the second half, after sharp falls in the first six months of the year, helped by the expected launch of new products by major electronics makers including Apple Computer.

He forecast the Nand flash market to grow from $11.1bn last year to $13.5bn this year, but cautioned that it may face oversupply early next year as producers ramp up capacity.

iSuppli said Samsung appeared to be converting some of its Nand capacity back to D-ram, but Mr Hwang said the company had no such plans as margins in the flash memory business were still higher than for D-rams.

Analysts expect operating profit in Samsung’s semiconductor division to fall from Won5,458bn in 2005 to Won4,970bn this year, due to poor first-half performance. But they said the business was recovering faster than expected in the second half.

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