Bloomberg News

Hynix Reports Second Consecutive Loss After Chip Prices Drop

February 02, 2012

(Updates with closing share price in fifth paragraph.)

Feb. 2 (Bloomberg) -- Hynix Semiconductor Inc., the world’s second-largest maker of computer-memory chips, reported a wider- than-expected fourth-quarter loss after chip prices dropped amid slowing personal-computer sales.

The net loss was 239.9 billion won ($213 million) for the three months ended Dec. 31, compared with a profit of 30 billion won a year earlier, Ichon, South Korea-based Hynix said today in a statement. The average of 25 analyst estimates compiled by Bloomberg was a loss of 161.7 billion won.

Prices for dynamic random access memory chips dropped last year as sales of smartphones and tablets, which use a different type of memory, cut demand for desktop and notebook units and floods in Thailand disrupted PC output. The South Korean chipmaker, set to be acquired by the country’s No. 1 mobile- phone carrier, SK Telecom Co., is counting on mobile semiconductors including NAND flash to revive earnings.

“Demand for PC DRAM won’t increase significantly,” Kim Hyung Sik, a Seoul-based analyst at Taurus Investment Securities Co., said before today’s announcement. “NAND flash has been consistently profitable, and there are only four companies in the world making it. Hynix will aggressively invest in NAND going forward.”

Spending Boost

Hynix gained 0.4 percent to 27,300 won at the close in Seoul trading, while the benchmark Kospi index rose 1.3 percent.

The company plans to increase capital expenditure 20 percent to 4.2 trillion won this year, and more than half of that will be spent to boost NAND flash output, Hynix said today.

Fourth-quarter operating loss for was 167.5 billion won on sales of 2.55 trillion won. The full-year net loss was 56 billion won, falling from a profit of 2.6 trillion won in 2010, while annual sales fell 14 percent to 10.4 trillion won.

The price of the benchmark DDR3 2-gigabit DRAM dropped 51 percent in 2011, according to data from Taipei-based Dramexchange Technology Inc., operator of Asia’s largest spot market for semiconductors.

PC makers also trimmed memory purchases because floods in Thailand left them short of hard-disk drives needed to make desktop and laptop computers.

Prices remained low through the fourth quarter even as Taiwanese makers cut output because PC makers curtailed chip purchases after the Thai floods, Shin Hyun Joon, a Seoul-based analyst at Dongbu Securities Co., wrote in a Jan. 25 report.

PC Decline

PC shipments in the U.S. declined for the first time in a decade last year, research firm IDC said Jan. 11.

Micron Technology Inc. in December also reported a second quarterly loss in a row, while Nanya Technology Corp. and Inotera Memories Inc. last month posted their eighth quarter of losses.

Lowering production costs by making more chips with a circuitry narrower than 40 nanometers helped Hynix, Dongbu’s Shin said. Miniaturization allows chipmakers to pack more memory in each chip, making them cheaper to produce.

Led by Samsung Electronics Co., chip makers are increasingly turning to chips for smartphones as sales of the iPhone and other computer-like mobile devices surge.

The NAND-flash market will probably grow to $46 billion by 2015 from $21 billion in 2010, driven by use in mobile devices, according to Sanford C. Bernstein & Co.

Hynix’s expansion in flash memory may gain speed under new ownership, Taurus’s Kim said.

Shareholders of the chipmaker and SK Telecom agreed to set the final price for 21 percent of Hynix at 3.37 trillion won, Korea Exchange Bank, which led the sale, said Jan. 31.

The phone carrier is part of SK Group, South Korea’s third- largest industrial group.

--Editors: Terje Langeland, Dave McCombs

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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