Samsung Electronics Co Ltd <005930.KS> should beat its record first-quarter profit in the coming two periods as the world's largest semiconductor and flat-screen TV maker rides a broad global technology recovery.

Increased investments by Samsung and its rivals in the panel display and chip businesses, however, threaten to re-start the industry's chronic over-supply cycle and cloud its longer-term prospects.

Better-than-expected demand for personal computers and limited supply growth by smaller players have lifted prices of Samsung's mainstay DRAM and NAND memory chips and pushed its shares to an all-time high.

First-quarter consolidated operating profit jumped about sevenfold, Samsung said in earnings guidance on Tuesday, keeping it on track for a record full-year profit.

I believe earnings will peak in the third quarter, but there's a risk that DRAM prices' strength may continue and hit demand growth. DRAM supplies will also grow more toward the second half, said Song Myung-sup, an analyst at HI Investment & Securities.

Among key challenges this year is the foreign exchange rate -- not only the won/dollar but also a falling won/yen, as competition with Japan is heating up on flat screen TVs.

Sony <6758.T> reported a first profit in five quarters in February as a restructuring at the Japanese electronics maker starts to pay off.

OVERSUPPLY RISKS

Samsung's guidance for record first-quarter profit is the latest sign that a once-battered global technology industry is on a firm recovery path, helped by government stimulus spending around the world and new product launches such as Apple Inc's iPad.

But a history of over-investment in the sector and Samsung's strong recent share gains have worried some market watchers.

There'll be oversupply in both or either LCD and memory division and that will hurt profit again, said Robert R. Jakobsen, a Copenhagen-based analyst at Jyske Bank -- alone among 44 analysts covering Samsung to have a 'sell' rating on the stock, according to Thomson Reuters I/B/E/S.

Currently, the market is not factoring in that it's going to happen, but it is going to happen at some point. That's why I have a sell rating... I'm just waiting for that opportunity to enter the stock again.

Shares in Samsung, also the world's No.2 mobile phone maker behind Finland's Nokia , eased 0.1 percent to close at 869,000 won after hitting an all-time high of 875,000 won.

Improving industry prospects and expectations of strong earnings have helped add around $16 billion to Samsung's market value, to $114 billion, in the past five weeks.

FORECAST-BEATING PROFITS

Samsung and its high-tech rivals are being lifted by a global economic recovery, and I think that will continue for the April-June period, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management in Tokyo.

I'm hoping to see similarly solid guidance from U.S. and Japanese makers that announce their outlooks later... (but) compared with Sony and Panasonic, Samsung has been ahead in establishing profitable operations in emerging markets.

Samsung, Asia's most valuable technology firm, is the first major global electronics firm to provide guidance ahead of the quarterly results season. Sony Ericsson reports earnings on April 16, Nokia on April 22 and LG Electronics <066570.KS> on April 28.

Samsung, which overtook Hewlett-Packard last year as the world's biggest electronics firm by revenue, estimated its January-March consolidated operating profit at a record 4.3 trillion won ($3.83 billion), higher than a consensus forecast for 4.1 trillion won polled by Thomson Reuters I/B/E/S.

Sales were seen in the middle of a 33-35 trillion won range.

Analysts expect profits from the chip division, which swung to a deep loss a year ago and then made a spectacular turnaround in the third quarter, would account for half of Samsung's consolidated first-quarter operating profit.

Chips accounted for 46 percent of Samsung's profit in the fourth quarter, while telecoms generated 27 percent and the rest was almost evenly split between LCD and appliances.

Detailed quarterly results are due later this month. They will be the first set of results since Choi Gee-sung took over as chief executive in December.

Choi, the former head of Samsung's mobile and flat screen divisions, is known as a marketing guru in Samsung. He literally built its semiconductor marketing in Europe from scratch in 1980s, reportedly boosting sales from just $1 million to $125 million in three years.

($1=1122.0 Won)

(Additional reporting by Rhee So-eui and Jungyoun Park in SEOUL and Taiga Uranaka in TOKYO; Editing by Lincoln Feast)

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