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Appeared on: Wednesday, May 19, 2004
Samsung says PC memory shortage to continue

Samsung Electronics said it expected a shortage of the chips throughout 2004, with inventories at low levels and supply constrained.

Samsung, which is also the world's third-largest mobile phone producer, said it expected to sell more handsets in the second quarter after shipping a record 20.1 million in the first quarter, driven by U.S. and Asian demand.

Smaller handset rival LG Electronics Inc also offered an upbeat outlook, saying it predicted its cellphone profit margins would improve in the second quarter, helped by a rise in shipments and sales of high-end handsets such as third-generation models.

Prices of dynamic random access memory (DRAM) chips, used mainly for computer memory, have soared since the start of the year on tight supply as chip makers switch to making flash memory and hit problems introducing new production technology.

The chip shortage was a key reason for Samsung's near tripling of profits in the first quarter, along with buoyant handsets and flat-screen businesses.

The price of industry standard 256-megabit chips rose 43 percent in the first three months of the year to $5.29, according to chip broker DRAMexchange.com.

Samsung charges a 10-20 percent premium for its chips over rivals because of its higher quality and long-term contracts with a broad customer base, analysts say.

Shares in Samsung, the world's most valuable technology company outside the United States, were 6.02 percent higher at 502,000 won by 0530 GMT, outperforming a 5.36 percent rise in the broader market LG Electronics was up 9.42 percent to 63,900 won.

Samsung said it expected to raise its annual mobile phone shipment target for 2004, currently set at 65 million units, although the company noted pressure on average selling prices was rising in some markets.

Samsung's record performance contrasts with downbeat forecasts from Nokia

LG, the world's fifth-largest cellphone maker, said it expected its handset operating profit margin would pick up in the second quarter. It suffered weak margins in the first quarter, hit by heavy inventories and a fall in prices for its cellphones.


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