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SEOUL, Apr 12 (Reuters) Samsung Electronics Co. Ltd. KS> , the world's top memory chip maker, is likely to report lacklustre first-quarter earnings on Friday, hit by shrinking profit margins in memory chips and mobile phones.

The outlook for the current quarter is also grim as prices for flash memory chips, popular in hot-selling digital cameras and music players, will slide further before recovering in the second half on seasonal demand.

A surge in the Korean won, which is 4.5 percent higher against the dollar than a year ago, also hurt Samsung's competitiveness by making its products more expensive. Samsung derives more than two-thirds of its sales from exports.

''Every unit is likely to come short of expectations,'' said Yu Chang-eyun, analyst at BNP Paribas Peregrine.

Samsung, the most valuable technology company outside of the United States, is expected to report an operating profit of 1.79 trillion won ($1.88 billion) in the first quarter to March, down 17 percent from 2.15 trillion a year ago, according to a Reuters survey of 12 analysts.

Net profit, on the other hand, will likely come in at 1.84 trillion won, up 23 percent rise from 1.5 trillion a year before.

But the favourable comparison is mainly due to a 700 billion won write-down to support its credit-card affiliate, Samsung Card, in the first quarter of last year.

Revenue was expected to come in at 14.98 trillion won, up from 13.81 trillion. Samsung is forecast to earn a 9 trillion won net profit this year, an 18 percent increase from 7.64 trillion in 2005, Reuters Estimates showed.

RISING WON, LOWER MARGINS Booming demand for NAND-type flash memory chips, used in products like Apple Computer Inc.'s iPod, led Samsung to a 40 percent jump in profits in the fourth quarter. But the chip prices have slumped by more than 20 percent since January as extra supplies poured in while consumer demand cooled off.

Merrill Lynch expects Samsung's NAND profit margins to slip to 38 percent in the first quarter from 46 percent a year ago and 49 percent in the previous quarter.

Samsung, which has about half of the world's NAND flash chip market, expects prices to drop by up to 50 percent for the year.

''The critical point for Samsung should be early May,'' said Jay Kim, analyst at Hyundai Securities. ''Flash memory prices should find a floor around that time, and then the low prices could spur demand.'' On the cell phone front, the world's third-largest maker of handsets after Nokia and Motorola is likely to have felt the full effect of the won's appreciation and of higher-than-expected marketing costs.

Samsung is expected to have sold over 29 million phones in the first quarter, a record after the 27.2 million sold in the fourth quarter. Margins are likely to have dropped to about 10 percent, down from 17 percent a year ago but up from 8 percent in the fourth quarter.

The world's second maker of large LCD panels after LG.Philips LCD is likely to see its display unit squeezed by aggressive discounting by retailers, a collapse in computer monitor prices and costs linked to the start-up of a new LCD production line.

LG.Philips swung to a profit in the first quarter on growing sales of TV panels, but it expected margins to drop over the next quarter due to sliding panel prices.

''The fall in LCD prices will slow down in the second half,'' said Lee Min-hee, analyst at CJ Investment Securities. ''But the oversupply problem will continue throughout the year.'' LCD makers are rushing into joint investment plans and seeking tie-ups to survive margin-crushing competition.

Samsung and Japan's Sony Corp. announced on Monday a $2 billion expansion of a joint LCD plant. Taiwan's AU Optronics TW> , the third-biggest LCD maker, also said on Friday it would acquire smaller local rival Quanta Display Inc. to compete with leading Korean makers.

The only bright spot is Samsung's dynamic random access memory (DRAM) division, which has enjoyed solid momentum on the back of a worldwide shortage. Shipments of DRAM, used in personal computers and game consoles, are likely to show a 3.5 percent rise from the prior quarter.

Shares in Samsung, the country's biggest stock with market value of 93 trillion won, fell 4.4 percent in the first quarter, trailing the broader market's 1.4 percent fall.

($1=954.0 Won) REUTERS PV BS1215