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3/28/2008
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Samsung Blames Weak Chip Market For Lower Earnings Forecast

A soft semiconductor market and a weak global economy contribute to gloomier outlook.

Samsung lowered its annual sales forecast Friday, blaming a low dollar, high oil prices, and softness in the semiconductor market.

In January, Samsung projected more than 15% annual sales growth, based on demand for flat-screens, high-end mobile handsets, and possible improvement in the "collapsed" memory chip market.

"We will increase our global sales by over 10% this year from the previous year," said Samsung CEO Yun Jong-yong, in a statement. He did add that profit for the year is expected to be higher than last year as the company focuses on its four key businesses: semiconductors, mobile handsets, LCD panels, and TV sets. Samsung also claims to be the world's largest chipmaker; it is the world's second largest mobile phone maker with about 13% of the market, according to recent Gartner figures. Nokia's the largest at 40%; Motorola is third with about 12%.

Samsung's reduced forecast is just the latest sign that mobile phone makers are feeling the heat of a roiled global economy. Sony Ericsson lowered its quarterly forecast 10 days ago; Mitsubishi said in early March it is withdrawing from the mobile phone market entirely.

In its last fiscal year, Samsung reported 7% sales growth, with revenues of 63.18 trillion Korean won ($63.6 billion) last year with a net profit of 7.43 trillion Korean won ($7.48 billion).

With its diverse holdings, the company noted that its semiconductor business has been hardest hit, and that weakness there may reduce profits from its flat screen and mobile handset businesses. "The price of DRAM chips, which was expected to recover this year, is still in the doldrums, showing no signs of recovery," Samsung said.

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