Samsung's profit may disappoint but chip outlook positive

For Samsung, which counts Sony Corp as its biggest customer, bringing in nearly 7 trillion won ($6.4 billion) of sales annually, a protracted suspension of flat-screen TV production in Japan results in lost revenue, but it also benefits from a tightening supply of chips, for which it competes with the likes of Japan's Toshiba Corp.

Samsung, Asia's most valuable technology firm with a market value of around $142 billion, is due to report January-March guidance on Thursday before it announces detailed quarterly results in late April.

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It is likely to report 3.17 trillion won in January-March operating profit on revenue of 38 trillion won, according to a consensus of 29 analysts surveyed by Thomson Reuters I/B/E/S.

According to StarMine SmartEstimates, which places more weight on recent forecasts by top-rated analysts, Samsung's operating profit may show a downside surprise of 10 percent to 2.9 trillion won.

That would be its lowest profit since the second quarter of 2009, and down 42 percent from a year ago and 4 percent from the preceding quarter.

On a global basis, Japan supplies more than one-third of NAND-type flash memory chips, used in tablets and smartphones, and 14 percent of computer memory chips.

"This will be the low point for the year. Sequential earnings growth can be expected for the next three quarters as memory and LCD margins expand and the strong season gets under way," Matt Evans, a CLSA analyst, said in a note.

Most LCD flat-screen makers are widely expected to have suffered losses in the January-March quarter due to weak demand from TV makers. From Sony to Dutch electronics group Philips, TV makers are struggling, hit by fierce competition from ever cheaper TV brands and fragile consumer spending. Many firms are warning of another unprofitable quarter.

SOLID MEMORY CHIPS, WEAKENING TABLETS

Earnings at Samsung, which controls nearly 40 percent of global dynamic random access memory (DRAM) and NAND flash memory market, will improve from the current quarter on stable panel prices and a rebound in the battered memory chip market. Contract prices of DRAM chips have risen 3 percent since the quake and NAND chips have risen 15 percent.

"Memory chips will lead Samsung's profit recovery as major electronics firms are placing more orders to Korean firms following the Japan quake and demand is also expanding thanks to growing smartphones and tablet markets," said Kim Young-chan, an analyst at Shinhan Investment Corp.