Samsung is faces fierce competition from mobile phone rivals

Samsung said it made 1.51 trillion won ($1.59bn; �864m) in the three months to the end of June, compared with 1.69 trillion won last year.

But the company said it expected to see a recovery across its businesses in the final six months of the year.

It also unveiled a $1.9bn deal to make LCD display screens for Sony of Japan.

Under the terms of the joint venture, Samsung will make LCD panels for 50 inch flat screen TVs following a "significant" increase in demand.

Fierce competition

Despite news of the deal with Sony, Samsung has been struggling with a general worldwide supply glut in LCD TVs.

The firm, which is the world's leading memory chip maker, has also been feeling the heat from rivals Nokia and Motorola in the fiercely competitive mobile phone market.

Profit margins at its phone business dropped to 9.5% in the second quarter, from 12% in the same period a year ago, the firm said.

However, Samsung forecast that demand for its mobile phones would pick up and prices for LCD panels would stabilise.