Chip prices have fallen by one-third in the past year

Samsung earned 1.13 trillion won (�600m; $960m) net profit in the three months to end-June, down from 1.92 trillion won a year earlier.

The firm said demand for memory chips, mobile handsets and flat screens - all key products for Samsung - was slack, leading to heavy price-cuts.

But investors were cheered by the results, bidding up Samsung's shares to a 15-month high amid hopes that the worst could now be over.

"The key for Samsung is whether memory chip prices and handset sales will pick up in the second half," said Oh Sung-sik of Franklin Templeton Investment Trust Management.

"But many investors are already betting it will do better in coming months."

Cautious optimism

Samsung said that the Sars virus had knocked a dent in this quarter's results.

Mobile phone sales fell 7.7% short of target, for example.

But it insisted it would catch up in the rest of the year, principally by launching a range of new products in the second half.

Samsung also predicted a rebound in long-sluggish computer chip prices.

"The PC market will likely grow 11% quarter-on-quarter, driven by the corporate replacement demand," said Kim Ilung, vice president at Samsung's semiconductor division.

Unlike chip rivals such as Micron and Hynix, Samsung has remained profitable, despite seeing its prices fall by about one-third in the past year.