SEOUL -- Samsung Electronics reported third-quarter net income of 1.88 trillion won on 14.54 trillion won in sales, spurred by semiconductors, LCDs and mobile phones. The company sold a record 26.8 million phones in the third quarter.

Year-on-year, overall sales were up 1.4%. Operating profits fell 22.5%, however.

Sequentially, operating income was 2.13 trillion won, up 28.8%, net profit rose 11%, and sales jumped 7%. Operating profit surged 29% in the third quarter on the back of increased sales of NAND flash chips, strong demand for LCDs and increased sales of mobile phones in Europe and North America.

The growth rate of net profit in the third-quarter was less than that of operating profit due to provisions set aside to cover costs related to the U.S-government investigation into the price-fixing of memory chips.

Semiconductor sales and net income increased to 4.59 trillion won and 1.35 trillion won, respectively, as demand for NAND Flash chips used in MP3 players and mobile phones remained robust. Migration to the finer process technology in both DRAM and NAND Flash helped reduce manufacturing costs and boost profitability.

Samsung produces DRAM chips on 80nm and 90nm processes, and the company finished developing a 512Mbit DDR2 memory device on a 70nm process. Yields per wafer will be 100% higher than using 90nm technology.

Telecommunication Network posted sales of 4.58 trillion won, and operating income of 550 billion won. Globally, the handset market is increasingly becoming more competitive as companies produce more mid-to-low-end handsets. Demand for Blue-Black phones, launched in November 2004, remained robust in the quarter. The company expects stronger ASPs in the fourth quarter with the launch of new premium products such as D600 and 3G phones.

LCD reported revenue and operating income figures of 2.68 trillion won and 300 billion won, respectively. The company expects its performance to improve in the fourth quarter as demand for LCDs increases, especially the sales of 32" and larger LCD TV panels.

Digital Media sales decreased to 1.64 trillion won and posted a 20 billion won operating loss. Sales in its Digital Appliance Business dropped 15% to 850 billion won and operating income at 40 billion won.

Samsung anticipates positive fourth-quarter results as demand for IT products tend to surge in the year end.