July 19, 2006 – Samsung Electronics Co. said group operating profits fell 12% in its fiscal 2Q06 ended in June, mainly due to a drop in NAND flash chip prices. Semiconductor sales rose 2% sequentially and 6% year-on-year to 4.42 trillion won (US $), while the unit’s operating profits of 980 billion won ($) were down 12% vs. 1Q06 and 11% vs. a year ago.

NAND flash memory is typically down during this seasonal period, and prices began stabilizing in May with further improvement expected in 2H06, the company noted, adding that it expects to see more memory demand with the release of new products requiring more memory, such as MP3s, PMPs, and handsets. A seasonal pickup in 3Q is anticipated, with an extra boost provided by a migration to 60nm process technology, which will reduce manufacturing costs and improve profits.

In Samsung’s 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, the company noted.

Woosik Chu, SVP and head of Samsung’ investor-relations team, said the company expects the 2Q slide to be mark a trough, and already the company is seeing stabilizing market conditions for NAND flash, LCDs, and handsets.