PREVIEW-Samsung Elec Q4 profit seen lower on weak chips

* What: Q4 earnings

* When: Tuesday

* Weak chip business to outweigh strong screens, mobiles

By Rhee So-eui

SEOUL, Jan 11 (Reuters) - Samsung Electronics (005930.KS), the world's top maker of memory chips used in gadgets from computers to cameras, is expected to post a 16 percent drop in quarterly profit, and will struggle in the current first half as a glut of chips coincides with a weak season for sales.

But the technology powerhouse should enjoy a strong year for its display screens and mobile phones. Analysts predict Samsung will increase net profit in 2008 by 16 percent.

The price of dynamic random access memory (DRAM), used in personal computers, is estimated to have fallen nearly 30 percent in October-December. Makers are betting that spending cutbacks from cash-starved manufacturers and improving demand will salvage the sector this year, but it's unlikely to be a smooth ride.

"Chip makers will have to cut production," said Jae H. Lee, analyst at Daiwa Securities. "Even the most bullish analysts don't expect a price rebound until the end of the first quarter."

Oversupply also makes the outlook bleak for NAND flash memory for consumer gadgets such as digital cameras and music players. Analysts expect average NAND prices to also have fallen about 30 percent in the fourth quarter, with a similar price drop in store for the current January-March quarter.

Samsung's liquid crystal display (LCD) unit, however, has increased its market share and looks set to enjoy a strong year following industry-wide investment cuts in 2007.

And the world's second-biggest mobile phone business likely posted record quarterly sales, and aims to further grow in 2008 by pushing in both the low-cost and premium segments.

Samsung's October-December net profit is forecast at 1.98 trillion won ($2.11 billion), down from 2.37 trillion won a year earlier, according to 10 analysts polled by Reuters. Third-quarter profit was 2.19 trillion won.

Operating profit is seen dropping 21 percent to 1.61 trillion won, while sales should have edged up to 16.94 trillion won.

But in 2008, Samsung is expected to earn 8.3 trillion won, up from an expected 7.13 trillion won last year, according to Reuters Estimates.

Samsung shares, valued at $82 billion, slid 3.3 percent in October-December, while the broader market slipped 2.5 percent.

HANDSET, SCREEN MOMENTUM

Samsung's DRAM rivals are also expected to post weak October-December results, with local rival Hynix Semiconductor Inc (000660.KS) profits seen collapsing to 140 billion won from 1.015 trillion won a year ago.

Powerchip Semiconductor Corp (5346.TWO), Taiwan's top DRAM maker, is expected to post a T$5.51 billion loss, its third straight quarter in the red, versus a year-ago profit of T$15.33 billion. Nanya Technology Corp (2408.TW) is forecast to report a T$2.26 billion loss, against a year-ago profit of T$6.5 billion, according to Reuters Estimates.

Samsung, which trails Nokia (NOK1V.HE) but overtook Motorola Inc (MOT.N) in the handset market, is expected to have sold a record 48-49 million phones in the fourth quarter. The unit's operating profit margin is seen at 9 percent, dropping from 12 percent in the third quarter due to higher marketing costs.

The company, also the world's top maker of large LCD screens and TV sets, is expected to post an 18-19 percent operating profit margin from its LCD panel business in the fourth quarter, steady from 17 percent in the third quarter.

In the third quarter of 2007, Samsung's semiconductor business accounted for 30 percent of its sales and the LCD unit made up 24 percent. Its mobile phone and telecom equipment business contributed another 30 percent. ($1=937.2 Won) (Additional reporting by Baker Li in TAIPEI; Editing by Keiron Henderson & Ian Geoghegan)