(Adds more company comments, updates shares)
By Rhee So-eui and Marie-France Han
SEOUL, Jan 15 (Reuters) - Samsung Electronics (005930.KS), the biggest maker of memory chips used in computers, cameras and music players, posted a smaller-than-expected 7 percent dip in quarterly profit, as strong sales of its TV screens eclipsed falling chip prices.
The South Korean technology powerhouse said it expected a global oversupply of computer chips and lower price to last through the first half, but market conditions should change "dramatically" in the second half when demand picks up.
"Once the memory business recovers -- I don't know whether it will be late in the second quarter or in the third quarter -- the results will show a strong rebound," Chu Woo-sik, executive vice president of investor relations, told reporters.
Samsung is expected to increase 2008 net profit by around 12 percent to 8.3 trillion won, according to Reuters Estimates.
The company's shares, valued at $84 billion, closed 1.3 percent higher at 532,000 won in a wider market .KS11 that fell more than 1 percent. The stock earlier gained 3 percent to its highest since Jan. 4.
"It looks like Samsung has moved to improve its product mix and cut costs faster than the market had expected," said Kim Young-il, fund manager at Hanwha Investment Trust Management.
"While a slowing U.S. economy would weigh on chip demand, that would also encourage manufacturers to rein in capital expenditure."
Investigators earlier raided parent Samsung Group offices as part of a probe into bribery allegations. [nSEO346442]
Samsung's once-flourishing semiconductor business again showed the impact of a persistent oversupply that has savaged chip makers' profits.
Operating margins at the chip unit, which accounts for almost a third of total sales, tumbled to 9 percent in October-December, from 18 percent in the previous quarter and 31 percent a year ago.
But Samsung's liquid crystal display (LCD) unit had another strong quarter, with margins more than doubling to 21 percent. LCD sales make up about a quarter of total sales.
The two units have seen a reversal of fortunes over the last year, with the chip unit's operating profit falling 74 percent to 430 billion won in October-December from a year-earlier 1.66 trillion won. The LCD business trebled to 920 billion won.
The world's top maker of large LCD screens and TV sets posted October-December net profit of 2.21 trillion won ($2.36 billion), beating analysts' forecast for 1.98 trillion won.
The technology powerhouse had earned 2.37 trillion won net profit a year earlier and 2.19 trillion won in the third quarter.
For more earnings details, see the company's Web site at: here arningsrelease/downloads/2007/20080115_conference_eng.pdf
Samsung and other makers of dynamic random access memory (DRAM) used in PCs are betting that spending cutbacks from cash-starved manufacturers and improving demand will eventually salvage the sector this year.
But the recovery, when it happens, is likely to be bumpy.
An expected oversupply also clouds the outlook for NAND flash memory, used in digital cameras and MP3 music players.
Samsung forecast a double-digit percent decline in prices of both DRAM and NAND chips in the current quarter. Samsung's Chu said the memory business could still post "some profit" this quarter, but any profit would be less than in October-December.
Chu said the DRAM business still aimed to outgrow the market this year in shipment terms, without elaborating. There would be no production cuts, he said.
In screens and display panels, Samsung looks set for a strong year following industry-wide investment cuts in 2007. On Monday, smaller rival LG.Philips LCD (034220.KS) posted record quarterly profit on solid demand and tight supplies. [ID:nSEO281439]
"Samsung's earnings are expected to show a V-shaped recovery in 2008 after hitting a bottom in Q1, backed by strong non-semiconductor divisions, including LCD and handsets," said James Song, analyst at Daewoo Securities.
Samsung, which trails Nokia NOK1V.HE but overtook Motorola Inc MOT.N in the handset market last year, sold 46.3 million phones last quarter, up 9 percent from July-September.
Samsung's operating profit was 1.78 trillion won, topping an average forecast of 1.61 trillion won. Sales rose to 17.48 trillion won, beating a forecast 16.94 trillion won. ($1=937.1 Won) (Additional reporting by Kim Yeon-hee, Kim Soyoung, Lee Jin-joo and Angela Moon, editing by Keiron Henderson & Ian Geoghegan)