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SAMSUNG Electronics Reports Second Quarter Results


Samsung Electronics reports revenue of KRW14.11 trillion, operating income of KRW1.42 trillion and net income of KRW1.51 trillion

SEOUL, Korea - July 14, 2006 :Samsung Electronics Co., Ltd. today announced its financial results for the second quarter of 2006 (ended June 30, 2006). The company posted net income of 1.51 trillion won on revenue of 14.11 trillion won. Operating income for the second quarter was 1.42 trillion won.

“During the second quarter, many companies in the same industry faced difficulties due to declining prices in mainstay products,” said Dr. Woosik Chu, senior vice president and head of Samsung Electronics’ investor-relations team.

“However, it’s noteworthy that operating profit exceeded market expectations amid a challenging market environment in the previous quarter? a result of our competitiveness and focus on innovation. We expect the second quarter to mark the trough and anticipate improvements in the second half of this year. Already, we saw market conditions for NAND flash, LCDs, and handsets stabilizing in the second quarter.”

Operating profit of the Semiconductor Business reached 980 billion won on revenue of 4.42 trillion won in the second quarter. Operating profit dropped 12% in the second quarter from the first quarter, mainly due to a drop in NAND flash chip prices.

In the DRAM business, profit margins continued to improve in premium products, such as mobile and graphics, while prices for DDR1 and DDR2 were strong amidst difficulties by competitors to migrate to 90nm processing technology.

Seasonality played a part in the price declines in the NAND flash memory market, however prices began to stabilize in the middle of May and conditions are expected to improve in the second half with rising demand.

Introduction of new products that require larger memory such as MP3s, PMPs, and handsets is expected to boost demand. In addition, conditions will improve with the seasonal demand pick up in the third quarter and migration to the finer process technology, in particular 60nm technology, will reduce manufacturing costs, boosting profitability.

The Telecommunication Network Business posted revenue of 4.28 trillion won, and operating income of 405 billion won.

The pace of the demand increase is expected to accelerate in the third-quarter as the overall 3G market grows and demand for replacement rises. Should sales of Samsung Electronics’ “Ultra edition” handsets gain traction, the company expects both the volume of sales and ASP to see significant improvement.

The LCD Business reported revenue and operating income of 2.85 trillion won and 75 billion won, respectively. Sales of 40-inch and larger panels jumped 87% quarter-on-quarter to 1.2 million panels due to strong demand for larger TVs. The profitability of the LCD Business in the previous quarter was a testament to Samsung Electronics’ competitiveness in the industry, as the climate for the LCD market was weak.

In the third quarter, increased demand for LCD TV panels is expected to dominate the industry dynamics. This will square favorably with an expected rise in demand for IT-related products. Thus, LCD panel prices are expected to stabilize.

Samsung Electronics plans to boost monthly capacity of its Line 7-1, the S-LCD joint venture, to an additional 15,000 units during the third quarter to accommodate the increasing demand for larger TVs and strengthen its market leadership in this segment. Cost leadership in TV panels, early adoption of the 7G line and economies of scale continue to be the strengths of Samsung Electronics.

Digital Media Business posted an operating loss of 60 billion won on revenue of 1.66 trillion won. Sales remained at the same level despite seasonality with the favorable sales of its premium-level LCD and PDP TVs such as the “Bordeaux” LCD TV. The majority of the 230 billion won in equity gains was generated from sales of digital media products at the overseas subsidiaries, reflecting a stronger profit position.

Sales of its Digital Appliance Business increased 13% quarter-on-quarter to 770 billion won with seasonal gains in air-conditioner sales. Operating loss was at 3 billion won.

About Samsung Electronics
Samsung Electronics Co., Ltd. is a global leader in semiconductor, telecommunication, digital media and digital convergence technologies with 2005 parent company sales of US$56.7 billion and net income of US$7.5 billion. Employing approximately 128,000 people in over 120 offices in 57 countries, the company consists of five main business units: Digital Appliance Business, Digital Media Business, LCD Business, Semiconductor Business and Telecommunication Network Business. Recognized as one of the fastest growing global brands, Samsung Electronics is a leading producer of digital TVs, memory chips, mobile phones, and TFT-LCDs.
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