SK Hynix Exceeds Estimates on Resilient Memory Demand

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  • Profit bolstered by stronger won; company sees chip shortages
  • Shares rise but still remain below record in September

SK Hynix Inc., a supplier of memory chips to Apple Inc., posted earnings that topped estimates, assuaging concerns about a slowdown in demand from smartphone makers.

Shares rose after the chipmaker reported that operating profit climbed to 4.47 trillion won ($4.2 billion) in the three months ended in December, the Icheon, South Korea-based company said in a statement Thursday. That compares with the 4.28 trillion-won average of estimates compiled by Bloomberg. Sales were 9.03 trillion won.

The earnings growth comes after Hynix shares slipped from record highs amid growing concerns that demand for memory chips would become sluggish, while the South Korean currency strengthened the most in Asia against the dollar. Its fourth-quarter performance reinforces optimism that the slide may be temporary and that Asia’s second-largest memory chipmaker can reach record profit for a second straight year.

“This current share price isn’t deserved,” Choi Do-yeon, a researcher at Shinhan Investment Corp., wrote in a report released before the earnings. “Despite unfavorable currency trends, a shortage in DRAM supplies is expected to help break record earnings in 2018.”

Hynix shares rose as much as 2.2 percent in early morning trade. The stock is down about 18 percent from a record in September.

“Year 2018 began with a mix of optimism and worries in the outlook of the market,” Chief Financial Officer Lee Myoung-young said in a call with investors. “Memory chips are essential in the changing technology paradigm and we expect their value to keep rising.”

Hynix maintains a operating profit margin of 49 percent and has a consolidated cash balance of 8.6 trillion won, Lee said. Investment is going to increase this year from 10.3 trillion won last year even though the amount hasn’t been set, he said.

The company expects chip shortages will continue and plans to match the demand in both DRAM and NAND, Lee said. Hynix is expecting the Intel chip flaw to increase demand for memory chips used in servers.

Hynix earns 12 percent of its revenue from Apple, whose outlook for iPhone X sales has been questioned by some analysts. Samsung Securities said last week that Apple may cut orders for the smartphone’s parts in the first half amid speculation of “sluggish sales.”

Hynix and Samsung together control more two thirds of the dynamic random-access memory market. Intel Corp. and Samsung also receive supplies from Hynix, which seeks to become the leader in the fast-growing NAND flash memory market after joining a Bain-led group chosen to take over Toshiba Corp.’s semiconductor unit.

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