Samsung rated “buy” on high chip demand

Samsung Electronics Co. and three rivals were raised to “buy” status by Merrill Lynch & Co. on higher-than-expected demand for chips that store data in computers and consumer electronics. Shares of Samsung, Hynix Semiconductor Inc., Elpida Memory Inc. and Powerchip Semiconductor Inc. rose after the upgrade. Memory chip sales will gain 8 percent this year and 14 percent in 2006, after an earlier projection for sales to shrink in the next two years, Simon Woo, a Seoul-based Merrill analyst, wrote in a note to clients Thursday. Merrill’s upgrade on the industry is in contrast to other brokerages including UBS AG, which earlier this week cut its recommendations on Europe’s largest chipmaker, Infineon Technologies AG, because of concerns of oversupply and falling semiconductor prices. The Philadelphia Semiconductor Index, which tracks 19 chipmakers, has risen 8.1 percent this year. “The market is definitely rebounding, but whether the current conditions will last remains unsure,’’ said Seiichiro Iwamoto, who manages about $9.7 billion in stocks at Fuji Investment Management in Tokyo. Mr. Woo said other chipmakers, which make the benchmark computer chip known as dynamic random access memory, weren’t upgraded because of their lower profit margins and valuations.