Hynix operating profit tops W1tr

Analysts expect momentum to slow in second half

Hynix Semiconductor, the world’s No. 2 memory chip maker, on Thursday reported a record high operating profit of 1.04 trillion won ($864 million) for the second quarter. 

But its shares slumped 4.24 percent, as its earnings momentum is expected to weaken in the second half. 

With a strong recovery of the memory chip market, Hynix’s operating profits shot up 3 percent from the previous quarter. Hynix also reported its historic high sales of 3.2 trillion won during the April to June period. 

However, analysts said Hynix’s profit is expected to slow down in the second half, as DRAM prices are falling amid worries about the faltering economic recovery and rising chip supply. 

“Hynix’s earnings are likely to decline in the third quarter,” Kim Young-jun, an analyst at LIG Invest & Securities said, citing Hynix’s lower-than-expected shipments and price falls of DRAM chips in the third quarter.

Hynix said during a conference call that it expected its DRAM prices to fall slightly in the third quarter, and its DRAM shipments to grow by a mid-single digit percent from the previous three months.

However, Hynix expected the chip market to remain healthy in the second half, saying a supply growth would be limited, while the demand would rise on strong seasonality. 

“PC demand will follow the seasonal historical patterns. We expect demand to be stable or stronger than the first half of this year,” a Hynix executive said during the conference call. 

PCs are a major use for DRAM chips. 

Kim Do-han, an analyst at Samsung Securities, said that Hynix’s higher-margin, specialty DRAM products would help offset the falls of commodity DRAM prices. 　

Hynix said its specialty DRAM products generated more than 50 percent of its sales in the second quarter, and the company is looking to raise that figure additionally in the latter half. 

He projected a moderate fall of chip prices in the third quarter, predicting that Hynix’s profit would remain flat or drop slightly in the current quarter. 

“Because of strong demand, chip prices are unlikely to drop dramatically,” Kim said. 　

Hynix, which has been put up for sale, has been struggling to buy a buyer for months. Major shareholders of the chipmaker have proposed that LG Group, Korea’s No. 4 conglomerate, take over a 5 percent stake in the chipmaker, reports said. LG Group apparently spurned the offer, releasing a statement last week that there had been no change in its stance that it would not acquire Hynix. 

Hynix shares slumped 18 percent as of Wednesday from its record-high of 28,800 won in late April.