Samsung Electronics, the world's top maker of memory chips, beat expectations with a 37 percent rise in quarterly profit as strong sales and margins in flat screens and mobile phones outweighed weakness in chips.
The South Korean company's chip business is likely to struggle with oversupply until demand picks up in the second half of the year and investment cutbacks by manufacturers kick in.
Samsung, also the world's top maker of large liquid crystal displays (LCD) screens and flat TV sets, on Friday posted a net profit of 2.19 trillion won ($2.20 billion) in the first quarter to March 31, beating a 2.01 trillion won forecast from 10 analysts polled by Reuters.
The technology powerhouse earned a 1.6 trillion won net profit a year earlier and 2.2 trillion won in the fourth quarter.
Operating margin in Samsung's semiconductor unit fell to 4 percent in the quarter from 9 percent in the fourth quarter. The figure was still better than the zero to 2 percent margin anticipated many analysts.
By contrast, Hynix Semiconductor, the world's No. 2 memory chipmaker, earlier on Friday reported a larger-than-expected quarterly loss, with an overall operating loss margin of 30 percent.
Makers of dynamic random access memory (DRAM), used in personal computers, are hoping that spending cutbacks from cash-starved chip makers and improving demand ahead of the gift-giving seasons later in the year will help them turn back into the black.
Market research firm iSuppli in a note dated Thursday upgraded its rating on the DRAM market to "neutral" from "negative," citing indications that the worst was over for DRAM suppliers.
Steep price drops have also hurt makers of NAND flash memory chips, used in gadgets such as digital cameras and portable music players.
Meanwhile, Samsung's LCD and mobile communications units posted results strong enough to outweigh the weakness in chips.
The display division posted another strong quarter, fuelled by a shortage of flat screens amid surging demand for sleek TVs ahead of the Beijing Olympics. Margins in the unit rose to 23 percent after the fourth quarter's already sparkling 21 percent.
Samsung, which trails only Finland's Nokia in the handset market, sold a 46.3 million phones in the first quarter, equaling the record number sold in the fourth. Margins in the unit rose to a strong 16 percent from the fourth quarter's 11 percent.
Samsung's operating profit surged 82 percent from the year-ago quarter to 2.15 trillion won, compared with an average forecast of 1.74 trillion won.
Sales came in at 17.1 trillion won, up from a 16.86 trillion won forecast.
In 2008, Samsung is expected to earn 9.18 trillion won, up from an expected 7.4 trillion won last year, according to Reuters Estimates.
Samsung shares rose 12 percent in the first quarter, against the KOSPI's percent loss, on expectations of strong earnings.