SK Hynix Profit Tops Estimates on Surging Memory-Chip Prices

  • Operating profit climbed 55 percent as sales rose 21 percent
  • Company is investing in factories opearions to boost capacity

SK Hynix Inc., a supplier of memory chips to Apple Inc., posted fourth-quarter profit that topped analysts’ estimates as semiconductor prices surged on robust demand for bigger storage in mobile devices and computers.

Operating profit rose 55 percent to 1.54 trillion won ($1.3 billion) in the three months ended December, the Icheon, South Korea-based company said in a statement Thursday. That compares with the 1.28 trillion-won average of estimates compiled by Bloomberg. Sales climbed 21 percent to 5.36 trillion won.

Increasing demand for dynamic random-access memory for PCs and mobile devices has combined with a shortage of supply to drive up prices and help SK Hynix boost margins. Prices of benchmark DDR3 4-gigabit dynamic random access chips rose to $2.79 at the end of the quarter from $1.84 a year earlier, according to data from InSpectrum Tech Inc.

The chipmaker also benefited from rising NAND memory prices, as demand for 3D chips rose and supply remains limited. NAND refers to chips used to store data in phones, tablets and some personal computers. The company’s shares rose 2.7 percent to 53,200 won as of 10:28 a.m. in Seoul.

“We will have to wait and see how the NAND investment turn out to be,” said Eom Tae-woong, an analyst at Bookook Securities. “Other than that, since we see a positive flow in DRAM prices, the outlook for the company seems not bad this year.”

Hynix last month said it will invest 2.21 trillion won on a new plant in Cheongju, south of Seoul, to meet increasing demand for NAND chips used in smartphones. It will spend another 950 billion won on its plant in Wuxi, China to raise capacity for DRAM.

Hynix will invest about 7 trillion won this year, investing more in NAND than DRAM this time, President Kim Joon-ho said after the earnings announcement. The company expects 20 percent growth in demand for DRAM; 30 percent growth in demand for NAND this year compared with last year.

On Tuesday, rival Samsung Electronics Co. posted operating profit that doubled in the fourth quarter of 2016 on robust semiconductor sales. Samsung said it doesn’t anticipate a rapid increase of industry chip supply nor a sudden decrease of smartphones demand in the first quarter.

A stronger dollar also benefited the company as most of its sales are made in the U.S. currency. Hynix posted consolidated net income excluding minority interest of 1.63 trillion won in the fourth quarter. Its shares climbed more 45 percent in 2016.

“Everything has been extremely good; the business condition, the level of inventories, the exchange rate, everything,” Lee Jae-yun, an analyst at Yuanta Securities, said before the announcement. “Of course, the main product is the DRAM, but as the NAND business turned to profit-making in the fourth quarter, that has had a positive effect too.”

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