Hynix Reports Third Consecutive Loss After Chip Prices Drop

SK Hynix Inc. (000660), the world’s second- largest maker of computer-memory chips, reported its third consecutive quarterly loss after slowing personal-computer sales kept chip prices from recovering.

The company had a net loss of 271.2 billion won ($238 million) in the three months ended March, compared with profit of 273.5 billion won a year earlier, Hynix said in a statement today. The loss was wider than the 199.4 billion won average of 21 analyst estimates compiled by Bloomberg.

Hynix joins smaller rival Micron Technology Inc. (MU) in being hurt by the drop in DRAM-chip prices, which almost halved in the past 12 months as personal-computer demand slowed. The chipmaker, reviewing plans to bid for Elpida Memory Inc.’s assets, stands to benefit from a possible decline in industry capacity after the Japanese company filed for bankruptcy and as new mobile phones and higher value laptops may boost demand.

“The numbers came in a little bit worse than expected, but it doesn’t mean much because there were expenses related to special bonuses,” Lee Jin Woo, a fund manager at Seoul-based KTB Asset Management Co., which oversees $5.7 billion in assets, said today. “The question is how much earnings will improve from the second quarter. The industry may improve towards the second half, but how fast it will happen remains to be seen.”

With special bonuses paid to employees to celebrate being part of SK Telecom Co. (017670) excluded, the first-quarter operating loss at Icheon, South Korea-based Hynix was similar to the previous quarter, James Kim, head of investor relations, said on a conference call today.

Elpida, Micron

Operating loss, or sales excluding the cost of goods sold and administrative costs, was 260 billion won on sales of 2.4 trillion won.

Hynix shares rose 0.6 percent to 27,200 won at the close of trading in Seoul, while the benchmark Kospi index gained 0.1 percent.

The price of the benchmark DDR3 2-gigabit DRAM closed at $1.02 on April 25, compared with $1.96 a year earlier, according to data from Taipei-based Dramexchange Technology Inc., operator of Asia’s largest spot market for semiconductors.

The average selling price of Hynix’s DRAM probably dropped 47 percent in the first quarter from a year earlier, according to estimates by Taurus Investment Securities Co.

Falling chip prices pushed smaller rival Elpida Memory to file for bankruptcy earlier this year, while Micron Technology reported a third consecutive quarterly loss in March.

Samsung Electronics Co. (005930) is the world’s biggest maker of memory chips.

Apple, Dell

Demand for memory chips slowed in the first quarter as hard-disk drive output didn’t recover as fast as expected after floods in Thailand, a key production site, Choi Sung Jae, a Seoul-based analyst at SK Securities Co., said in a March 30 report. Elpida’s bankruptcy will likely prompt major chip buyers, including Apple Inc., Dell Inc. and Hewlett-Packard Co. (HPQ), to seek alternative suppliers, helping boost prices in the second quarter, Choi wrote.

PC makers will likely start stocking up on memory chips to make laptop computers using Intel Corp.’s new Ivy Bridge processor, helping boost prices from May, Choi Do Yeon, a Seoul- based analyst at LIG Investment & Securities Co., said in an April 16 report.

Hynix submitted an initial proposal to bid for Elpida on March 30 and said it will decide whether to make a final bid after due diligence.

SK Telecom agreed to buy 21 percent of Hynix for 3.4 trillion won in November. Hynix plans to spend 4.2 trillion won in capital expenditure this year.

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

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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