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Samsung Electronics, Asia’s most valuable technology company, on Friday reported a 40 per cent rise in net profits in the fourth quarter, as surging demand for flat screens and memory chips used in mobile phones and MP3 players spurred the first rise in profit for five quarters.
Presenting an upbeat outlook for the year ahead, the South Korean electronics giant said it earned net profits of Won2,560bn ($2.6bn) in the three months to the end of December, up from Won1,880bn in the previous quarter and Won1,830bn a year earlier.
The results exceeded expectations - the median estimate of 13 analysts surveyed by Bloomberg was for net profits of Won2,300bn.
“Despite challenging market conditions, we achieved strong profit growth in the fourth quarter driven by healthy, solid results in our key business units and overseas subsidiaries,” said Chu Woo-sik, head of investor relations. “This is a result of our competitiveness and focus on innovation.”
Total operating profits for the year fell in line with Samsung’s earlier guidance – to Won8,000bn from Won12,000bn in 2004. Samsung shares lost 0.7 per cent to trade at Won679,000 on Friday morning.
The South Korean company has become the largest maker of flat screens, the second-largest chipmaker and number three mobile phone producer in the world, after spending billions of dollars to secure a technological edge over rivals. This month it became one of only four Asian companies with a market capitalisation of more than $100bn, underscoring its emergence as a leading global technology group.
The improvement in revenue and profits during the fourth quarter was due to the strength of Samsung’s semiconductor and liquid crystal display businesses, Mr Chu said.
Continued robust demand for the Nand flash chips used in MP3 players and mobile phones pushed net profits from the seminconductor business to Won1,620bn in the fourth quarter, a 21 per cent quarterly increase. Samsung said it expected solid growth this year, on increased demand for specialty chips used in graphic-focused products and its 8GB Nand flash semiconductors.
Net profits from the LCD division rose 36 per cent to Won400bn as increased production of its latest seventh-generation line, which makes glass sheets big enough to cut out eight 40-inch panels or six 46-inch panels, reached its potential.
LG Philips LCD, the world’s second largest manufacturer of flat-panels, on Thursday said stronger demand for large televisions boost its net profit more than ninefold in the fourth quarter.
The group, a joint venture between South Korea’s LG Electronics and Philips of the Netherlands, reported net profit of Won328bn in the October-December period, compared with Won35.4bn for the same period a year ago.
But profits from Samsung’s telecoms business fell by 31 per cent to Won380bn, although it sold a record 27.2m phones in the fourth quarter, the highest number of units on a quarterly basis.
However, Samsung said demand for its high-end premium phones remained strong and it expected to benefit from an expected 5-10 per cent rise in global demand for mobile phones this year.
The South Korean commerce ministry this week said it expected another record year for exports of digital consumer electronics in 2006, driven by cutting-edge mobile phones and flat panel displays made by Samsung and LG Electronics.
It forecast an 11.4 per cent increase in its exports of digital electronics this year to $114.7bn from a record $102.8bn last year, as third-generation wireless telecoms services were set to take off in Europe while expanded digital broadcasting and the digital TV market were likely to grow fast on the back of the football World Cup.