Samsung Electronics <005930.KS>, the world's top maker of memory chips and LCD screens, reported on Friday a much better-than-expected profit as strong sales of its mobile phones offset another weak quarter for chips and LCD screens.

The outlook is cautiously positive as the battered memory chip sector shows signs of emerging from a severe downturn with big production cuts helping ease a glut of chips.

Samsung vowed to outperform the market in semiconductors and handsets in the near-term.

Samsung, which ranks behind only Nokia in handsets, was helped by stellar margins in its telecommunications division, which surged to 12 percent from 2 percent in the previous quarter.

Samsung's semiconductor business continued to underperform, posting a worse-than-expected operating loss margin of 17 percent, from an already weak 14 percent loss margin in the fourth quarter.

But prices have been improving sharply in the past few weeks, and several analysts predict the unit may return to profit as early as in the current quarter.

January-March net profit fell to 619 billion won ($458.1 million) from 2.19 trillion won a year ago, but vastly exceeded an average forecast for a 149 billion won net profit. Samsung booked a 22 billion won net loss in the fourth quarter.

Samsung reported a surprise operating profit of 148 billion won, trumping expectations for a 152 billion won loss, and well below last year's 2.15 trillion won profit.

Smaller home rival Hynix Semiconductor Inc <000660.KS>, the world's No. 2 memory chip maker, earlier on Friday reported its sixth straight quarterly loss but predicted better days ahead as chip prices recover.

Samsung's first-quarter sales were 18.6 trillion won, also better than expected.

By 0133 GMT, Samsung's shares fell 2.23 percent, compared with an flat wider market <.KS11>. Shares in South Korea's biggest company have risen 39 percent this year through Thursday, beating the broader market's 22 percent gain.

Samsung's display division reported a loss margin of 8 percent, unchanged from the previous quarter.

(Reporting by Marie-France Han and Rhee So-eui; Editing by Jonathan Hopfner and Anshuman Daga)