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Samsung warns fourth quarter will be tough

Samsung Electronics has reported a record quarterly profit of $7.3 billion, nearly double 2011's figure.

Strong sales of high-end TVs and smartphones more than offset reduced orders for chips and screens from Apple, its rival and leading customer.

Most analysts, however, expect a run of four record quarters in a row to end in December.

The South Korean group is the world's leading maker of smartphones, TVs and memory chips.

It is ramping up its marketing to counter Apple's new iPhone and other products in a crowded $200 billion global smartphone market.

Samsung may have spent around $2.7 billion on marketing in July-September alone around the London Olympic Games and new Galaxy promotions, Credit Suisse has estimated.

This year's expected record profit of 28 trillion won ($25 billion) will also trigger higher performance related payouts to many of Samsung's 206,000 staff early next year.

And Samsung may have to set money aside this quarter if it fails in an appeal to overturn an August US court verdict that awarded more than $1 billion in damages to Apple for patent infringements by Samsung.

Profit at Samsung's mobile division is likely to have more than doubled in July-September to around 5 trillion won - around two thirds of total group profit - as smartphone shipments topped 58 million, including up to 20 million Galaxy S IIIs.

Ahead of full quarterly results due later this month, Samsung estimated its July-September operating profit jumped 91% to 8.1 trillion won from a year ago, beating an average forecast of 7.6 trillion won . That would be more than a fifth higher than the previous record in April-June.

The company, valued at around $197 billion, estimated its third-quarter revenue at 52 trillion won, in line with forecasts.

Strong handset sales made up for reduced profits from its chip business, as prices of its mainstay dynamic random access memory (DRAM) chips, used in computers and mobiles, dropped 14% in the September quarter.

DRAM chips now trade below what it costs most contract manufacturers to make them, and will squeeze near-term earnings, analysts say. Tablets and smartphones, the real growth areas, use far smaller memory storage.

Samsung is expected to invest less in chips next year due to the drop in demand, which could be bad news for semiconductor equipment manufacturers such as ASML.

Kwon Oh-hyun, promoted to Samsung chief executive in June, said late last month that the group has yet to finalise its 2013 investment plans.

Samsung is beefing up its product line-up, with the latest phone-cum-tablet Galaxy Note expected to go on sale in the US this month, and its ATIV smartphones that run on Microsoft's new Windows system to compete with Nokia's Lumia series.