Samsung forecasts dip in profits amid falling TV demand

Falling demand and prices of flat-screen TVs have hurt profits at various electronics makers
Samsung Electronics has forecast a dip in profits for the third quarter amid falling demand for flat-screen TVs and computer chips.

Samsung said it expected an operating profit of 4.2tn won ($3.5bn; £2.3bn) a 14% dip from a year earlier.

However, compared to the previous quarter, the projected profit is up 12%.

Analysts said Samsung's handset business had helped offset the falls elsewhere.

"Its telecommunications business is seen very positive as shipments of smartphones and other high-end handsets expanded," said Park Jong-Min of ING Investment Management.

Advantage Samsung?
Analysts said they expected Samsung's handset business to keep growing robustly, not least due to the Apple's decision to upgrade its existing model of iPhone4 with new features and technology, rather than launch a new version.

Apple had been expected to launch an iPhone5 at a media event held earlier this week.

"Given Apple's relatively unchanged new iPhone, Samsung will have the opportunity to eat into Apple's market share with its hardware build-up and growing software power until next year," said Jang In-Beom of Bookook Securities.

Samsung has also been growing its presence in the tablet PC market.

Last month the Korean electronics manufacturer announced that sales of the Samsung GALAXY S II had crossed the 10 million mark, doubling from five million in just eight weeks.

'Major risk'
Despite the optimism about the growth potential of its handset business, analysts said that external factors remain a big threat to the company in the short to medium-term.

There have been concerns that a slowdown in the US coupled with the ongoing debt crisis in Europe may hurt global growth and dent consumer demand.

"The macroeconomic situation will remain a major risk for Samsung in the fourth quarter," said Ahn Seong-Ho of Hanwha Securities.

At the same time, there are fears that volatility in the currency markets may also have a bearing on its earnings.

The Korean won has fallen as much as 10% against the US dollar since the start of July.

A weaker won makes Korean goods cheaper for foreign buyers.

"The weakening won may have inflated third-quarter profits," said Kim Young-Chan of Shinhan Investment Corp.

However, Mr Kim added the exchange rate remained a threat to Samsung as any recovery in the won would have a counter effect.