Samsung Elec sees PC chip recovery, strong phone sales

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SEOUL, Nov 28 (Reuters) South Korea's Samsung Electronics said the oversupply of memory chips used in personal computers was expected to ease in 2008, especially in the second half, and set ambitious targets for its mobile phone business.

Although the market for dynamic random access memory (DRAM) chips was still tough, rising demand for NAND-type flash chips used in portable gadgets, such as Apple Inc's iPod, means manufacturers will switch more production from DRAM to NAND, easing DRAM supply, said Chu Woo-sik, executive vice president in charge of investor relations.

''The market is very difficult for DRAM,'' he said at a technology forum organised by Samsung. But the world's biggest maker of memory chips reckons the DRAM market will recover next year, probably at the beginning of the second half, he said.

Chu also said the company was not intending to flood the market.

In October Samsung posted a flat third-quarter net profit as sluggish computer memory chip prices offset strong flat screens, and had warned that the whole memory sector could see losses in this quarter.

The DRAM sector has been plagued with oversupply since the beginning of the year, while strength in the liquid crystal display (LCD) industry has been largely due to a shortage in supply.

Samsung's forecast is more bullish than that of market research firm iSuppli, which on Nov. 14 cut its rating on suppliers of DRAM and flash memory chips to ''negative'' from ''neutral'', citing a supply glut and a fall in prices.

ISuppli said market conditions should slowly improve during the next few quarters, with DRAM picking up more quickly than NAND.

Samsung Electronics shares were up 2.2 percent to 551,000 won by 0430 GMT, beating a 0.3 percent gain in the wider market STRONG MOBILE PHONES Samsung's Chu said the company was confident the mobile phone sales would grow strongly, forecasting it would sell 25 percent more phones next year compared with this year.

The company expects to sell close to 50 million handsets in the fourth quarter, from a record 42.6 million in the third quarter.

Samsung, which said it was targeting the higher end of the market, said the global mobile phone industry would grow by 12 percent in 2008, reaching 1.28 billion units.

But Chu said higher marketing costs related to selling mobile phones could push fourth-quarter telecoms operating profit margin down by 2 to 3 percentage points from the third quarter's 12 percent margin.

Samsung's Chu said the company expected very strong growth in LCDs as customers buy more TVs to watch the 2008 Beijing Olympics.

The profit margin in the LCD business break above the 20 percent range in 2008, he said. The division posted a 17 percent operating profit margin in the third quarter.

Overall, Samsung hopes to reach an operating profit of about billion on a consolidated basis by 2012, with sales expected to reach 0 billion, Chu added.

Samsung had previously predicted that it would post on a consolidated basis sales of 0 billion in 2007.

He said Samsung was betting on non-memory semiconductors and on the printer market as its next growth engines.

REUTERS SLD SSC1158

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