Computer slump knocks 10% off Samsung profits

Samsung Electronics said yesterday that its profits had fallen by two-fifths because of of a slump in memory chip prices.

The South Korean technology giant said that it had been forced to cut prices every two weeks in order to attract customers in the first three months of the year.

The first-quarter profit figure was worse than investors had expected, with weak demand for computer equipment seen as the main factor.

However, shares in Samsung, which is the world's top memory chip maker but also makes a wide range of electronics products, rose.

The company called the outlook "cloudy", but said PC demand might pick up soon and cash-strapped rivals makers were unlikely to add capacity at their semiconductor factories.

The company, best known for sleek colour-screen mobile phones with features such as tiny cameras and voice dialling, said handset sales rose 14 per cent from the previous quarter.

Average selling prices slipped 5 per cent as it shifted its focus to lower-cost phones to boost its market share, but this should rebound later in the year when it rolls out new top-of-the-range models.

Samsung has doubled its share of the global handset market to 10 per cent in two years, overtaking Germany's Siemens and Sony Ericsson. It is now challenging the mobile phone giants Motorola and Nokia. The company sold 13.2 million mobile phones in the first quarter, up from 11.6 million in the fourth quarter.

Growth in this division is being driven by innovative designs, cutting-edge technology and aggressive marketing in Europe and the United States. Samsung said it aimed to sell 13 million mobile phones in the second quarter and 52.5 million for all of 2003.

Samsung earned a 1,130bn won ($937.7m) net profit in the first quarter, falling short of analysts' consensus forecasts of 1,370bn won. This compared with a 1,910bn won profit a year ago.

Turnover fell to 9,600bn won from 9,930bn won.

Samsung shares rose 4.3 per cent to close at 315,000 won on the back of a global technology rally triggered by a solid handset sale growth forecast from Nokia on Thursday.