For the third quarter ending September 30, Samsung reported net income of KRW2.69 trillion, up from KRW1.84 trillion a year ago. The South Korean chipmaker was expected to earn net income of KRW2.55 trillion, according to analysts’ estimates.

Sales meanwhile rose a very respectable 27.4% to KRW14.34 trillion, up from KRW11.26 trillion in the year ago quarter. This was despite a slump in semiconductor and flat screen prices.

The performance of Asia’s biggest electronics manufacturer has mirrored many of its rivals in reporting slower profit growth amid a very challenging business environment. Samsung admits it is facing slowing demand for chips, LCDs and mobile phones, especially as new factories increase supply. The record price of oil and high interest rates around the world are also thought to be leaving consumers with less money to spend.

Thus Samsung’s performance is reflecting the strain currently being felt by a lot of its peers. Last week, LG Philips LCD, the world’s second-largest maker of LCDs, posted a 15% fall in its quarterly profits, as tumbling flat-screen prices took their toll. It also warned that a global oversupply could push prices down by a further third.

Meanwhile, chip giant Intel’s third quarter figures were thrown off course by inventory adjustments at customers and lower than expected PC demand. It also set a downbeat forecast for the fourth quarter.

Yet it should be remembered that Samsung’s third-quarter profit exceeded that of Intel by more than a fifth and was almost triple that of Nokia, the world’s largest mobile phone maker. Therefore, the Suwon, South Korea-based company can draw some comfort from its fiscal performance.

Yet Samsung is still confronting falling prices in many of its core markets – semiconductors, flat screens and mobile phones accounted for more than 99% of Samsung’s operating profit this year.

Samsung is regarded as the world’s number two chipmaker after Intel, and its semiconductor business accounts for 70% of profits. Prices for dynamic random access memory (DRAM) chips (the main memory used in PCs), fell 10% in the third quarter compared with the second. Despite this, third-quarter semiconductor sales rose 40% from a year ago to KRW4.74 trillion. It expects DRAM demand to rise in the fourth quarter.

Samsung is also the world’s biggest maker of liquid-crystal displays (LCDs), and sales in this division rose 38% to KRW1.9 trillion. More worrying however, its LCD profit margin slumped to 12% in the third quarter from 33% in the second quarter.

Meanwhile, prices of LCDs fell 21% in the July-September period from the preceding three months. The company expects LCD demand to rise 11% in the fourth quarter, saying that any price decline in the run up to Christmas will be gentle. Yet most observers feel this is a slightly optimistic outlook.

One of the problems is that many consumers refuse to see the advantages associated with LCD televisions, especially considering their very high purchase cost. It doesn’t take much for consumers to spot the vast price difference between LCD televisions, compared with conventional CRT televisions (such as widescreen TVs), which sometimes still deliver better picture quality anyway over their thin panel counterparts.

Unfortunately, the oversupply of LCDs is likely to get worse, as inventories around the world fill up with unsold units. Added to this is the number of new LCD factories coming on line, as LCD makers ramp up production.

The other important unit is that of Samsung’s mobile handset division, which saw its sales rise 29% to KRW4.82 trillion after it sold 22.7 million mobile phones in the third quarter. But the telecoms division’s profit margin slipped to 12.7% from 16.1%.

Samsung is the third-largest maker of mobile phones after Nokia and Motorola, and has had the fastest sales growth among the world’s top three handset vendors this year. Yet it is facing increased competition from Nokia, which has cut prices this year in order to regain market share. Samsung expects handset sales for all of 2004 to exceed its forecast of 86 million units.