* Estimates Q3 operating profit at 10.1 trln won
* Mobile business profit seen stagnating on drop in S4sales-analysts
* Q3 smartphone sales seen at 86-88 mln units-analysts
By Miyoung Kim
SEOUL, Oct 4 (Reuters) - Samsung Electronics Co Ltd is on track to post its second consecutive year ofrecord earnings as a rebound in its semiconductor businessshields the South Korean tech giant from a slower smartphonemarket.
The world's biggest memory chipmaker is likely to see itssemiconductor earnings charge to a three-year high - amuch-needed shot in the arm - just as sales of its flagshipGalaxy S4 smartphone begin to flag, analysts say.
The global chip market has rallied since late 2012 due to asupply crunch caused by years of cautious investment to supportprices, and conversion of factory capacity to produce moreprofitable chips used in smartphones and tablets.
The market further tightened following a fire in earlySeptember at a China plant owned by SK Hynix, theworld's No.2 chipmaker. The drop in supply helped divertcustomers to Samsung, whose heavy investment in cutting-edgechip-making technologies has made it head and shoulders abovesmaller rivals like Micron Technology Inc.
"As of now, there is no real competitor for Samsung in the(memory) chip business," said Lee Seung-woo, a tech analyst atIBK Investment & Securities. "This dearth of players is expectedto allow Samsung to post considerable operating profitsthroughout this year and next year, even if demand flags."
Samsung is estimated to post an operating profit of 38.5trillion won ($35.85 billion) this year, up a third from 2012,according to a survey of 45 analysts by Thomson Reuters I/B/E/S.The company said on Friday operating profit is likely to reach arecord 10.1 trillion won in the third quarter.
Contract dynamic random access memory (DRAM) chip pricesjumped 9 percent in the second half of September from the firsthalf of that month while spot prices soared 37 percent.
UBS estimates supply of DRAM chips by SK Hynix would shrinkby 14 percent in the fourth quarter, plunging the overall DRAMmarket into a supply deficit of some 7 percent. The South Koreanfirm aims to fully restore operations in November.
Shares in Samsung ended Friday unchanged, after advancing asmuch as 3.1 percent on Wednesday prior to the earnings guidanceannouncement. Financial markets in South Korea were closed onThursday due to a public holiday.
Samsung estimated third-quarter operating profit rose 25percent from a year earlier, the slowest since the third quarterof 2011 when profit shrank 11 percent.
Samsung's mobile devices business has helped the companyreport a record profit every quarter since last year, except thefirst three months of 2013.
The division, which generates two-thirds of the company'stotal earnings, is stalling as sales of the Galaxy S4 slow andthe high-end market rapidly saturates, analysts say.
"The concern that high-end smartphones could see slowergrowth is a valid one. But Samsung has both the speed andfast-follower tendencies of Zara and a portfolio spanning high-and low-end products as well as components such as a brand likeSwatch," Lee at IBK said.
Barclays estimates S4 smartphone sales will have dropped to16 million sets in July-September from around 20 million in thetwo months following its late April debut. Sales may slipfurther to 13 million sets in the fourth quarter, according toBarclays.
Samsung is widely expected to have sold 86-88 millionsmartphones in the third quarter, up from 76 million in thesecond quarter, as the company increased shipments of cheapermodels to emerging markets.
Profits at its mobile division are seen at 6.4 trillion won,better than the second quarter's 6.3 trillion won but down froma record 6.5 trillion won in the first three months.
Underscoring the slowing pace of growth in the industry,Taiwan's HTC Corp posted its first ever quarterly losson Friday, hit by fierce competition and supply chainconstraints.
Samsung is now hoping new products such as the Galaxy Gearsmartwatch and a curved smartphone, which it plans to introducethis month, to help sustain growth momentum.
Hot on the heels of Samsung, LG Electronics Inc is planning to introduce a curved smartphone in November, theWall Street Journal reported. LG previously said it wouldintroduce such a model by the year-end.
As Samsung battles slowing growth at the top end of themarket, Kevin Packingham, the chief product officer of its U.S.mobile business, abruptly left the company. That was the secondmajor management change in the United States this year whereSamsung fiercely competes with Apple Inc.
Samsung said on Thursday that Packingham left the companyfor personal reasons. The departure followed the appointment ofGregory Lee, a former head of Samsung's Southeast Asia business,as the chief of Samsung's U.S. unit in July.
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