In a regulatory filing, Samsung said posted a 12.1 percent quarter-on-quarter decline in operating profits to 1.42 trillion won in the second quarter ended June 30, on sales of 14.11 trillion won.

Samsung recorded a 24.4 percent quarter-on-quarter profit drop the first quarter of this year. The profit is also the lowest in three years since Samsung earned 1.16 trillion won the second quarter of 2003.

Much of the profitability deterioration stemmed from seasonal demand weakness and strong pricing pressures in its mainstream markets, from memory chips to TFT-LCDs and mobile phones.

Steeper-than-expected price drops in NAND flash memory were the main culprit. But prices started to stabilize in May, as demand embedded flash and multichip packages improved, slowing price declines.

While NAND flash was weak, DRAM profit margins improved due to tightening supply. Overall memory chip sales grew 3 percent to 3.32 trillion won, while revenues from SOC chips, CMOS sensors and flat panel drive ICs grew 6 percent quarter-on quarter to 520 billion won.

Overall, Samsung's semiconductor sales dropped 12.1 percent sequentially to 980 billion won on sales of 4.42 trillion won .

"During the second quarter, many companies in the same industry faced difficulties due to declining prices in mainstay products," said Chu Woo-Sik, a senior vice president of Samsung.

In mobile phones, Samsung posted an 8 percent quarter-on-quarter decline to 4.04 trillion won. On a unit basis, phone sales fell 9 percent to 26.3 million.

Sik expects a stronger second half, with global sales of NAND flash, LCD, and handsets improving. NAND profits are projected to reach 40 percent the third quarter, up 10 percent from the second quarter, according to Chu.

For the first half, Samsung said it spent 4.74 trillion won, or 51 percent of its projected 9.23 trillion-won capex budget for 2006.