(Adds more quotes, shares)
* Says Q4 performance weaker than expected
* Sees overall demand for products weakening in 2009
* Sees sharp price decline in DRAM
* Sees drop in capex from 10 trln won to 7-8 trillion
By David Lawsky
SAN FRANCISCO, Dec 8 Samsung Electronics Co Ltd
(005930.KS) said on Monday it was cutting its targets for sales,
capital expenditures and profit, reflecting an increasingly tough
Chu Woo-sik, the Korean electronics giant's executive vice
president in charge of investor relations, said at an investor
conference that capital expenditures will drop from about 10
trillion won ($6.91 billion) expected this year to a range of 7
trillion won ($4.84 billion) to 8 trillion won ($5.53 billion)
But he said the company was still determining the amount
and it was subject to change.
The world's top maker of memory chips and liquid crystal
displays (LCDs) is facing a lengthy downturn in the
once-reliable memory market and a rapid margin deterioration in
the flat-screen sector, along with slowing sales of consumer
electronics in general.
Analysts say wider production cuts and more prudent
investment by top players are essential for the memory chip and
LCD industries to recover.
Chu, who spoke to investors and then amplified his remarks
at a news conference, said demand will weaken in 2009 and
profitability now is deteriorating "pretty fast" in some key
"(It) is difficult for us to make a profit in the fourth
quarter in memory," Chu said. "LCD is also struggling very hard
to make a profit."
He characterized flat-screen televisions as a commodity,
but said the company had more of an advantage in memory chips,
where it was able to differentiate itself.
Still, he predicted price declines for widely used DRAM
chips, and said the company's target had dropped from 100
percent unit growth to 90 percent for the current year.
Chu said weak demand had led to fierce price cuts in
large-screen televisions, causing profits to "vaporize."
Over the longer term he was optimistic, because he said
only 15 to 20 percent of televisions were digital.
Analysts at the conference expressed little surprise.
"It was widely expected, there was nothing too new," said
C.L. Muse of Barclays Capital. He said the company admitted its
problems and then chose to focus on what would be happening
later, especially in chips.
In early Seoul trade on Tuesday, Samsung shares were down
1.51 percent at 457,000 won by 0126 GMT, lagging the wider Seoul
market's .KS11 0.23 percent loss.
"You can point to a growth trajectory over the next three
to five years and Samsung is well-positioned to benefit from
that," he said.
Another analyst, who asked not to be quoted by name, said
he was "encouraged by the acknowledgment of the macro demand
slowdown and the need to preserve cash."
But the second analyst said, "I wish there had been a
little more specificity. There were really no numbers." Others
reflected disappointment with the lack of specifics.
Chu said that other firms were feeling even more pain than
Samsung, and that his company's market share was growing in
such areas as telephone handsets.
"We are pretty confident we will be coming out of this long
and dark tunnel a leaner and meaner animal," Chu said.
For the longer term, Souk JunHyung, who leads the display
research and development center, predicted "ultra definition"
television, two steps beyond high definition, by 2015.
He said screens will have much higher resolution than HD,
refresh more often and be as large as 82 inches.
Samsung's third-quarter results beat estimates in late
October thanks to decent margins in chips and a weak won, but
the company faces a grim future as the global economic crisis
is set to pressure demand.
Operating margins at Samsung's semiconductor unit fell to 5
percent in the third quarter compared with 6 percent in the
second quarter and 18 percent a year ago.
The memory sector, mired in a severe downturn that started
in early 2007, is not expecting a recovery before the second
quarter of 2009 at the earliest.
Chu said he personally believes that other countries should
not be giving aid to their troubled electronics companies. He
said his company has received no government help.
($1 = 1,447 won)
(Reporting by David Lawsky; Additional reporting by Rhee So-eui
in SEOUL; editing by Gary Hill and Keiron Henderson)