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SK Hynix’s Q3 operating profit rises by 400%

DRAM shipments are main factor, although analysts expected more
Oct 27,2017
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Third quarter operating profit for SK Hynix, the world’s second-largest memory chip producer, skyrocketed 414.8 percent from a year earlier to 3.74 trillion won ($3.32 billion), the company reported Thursday. Revenue for the same period surged 90.9 percent to 8.1 trillion won on the back of rising chip prices amid tight supplies.

Operating profit for the July-September period was 740 million won more than the company’s entire operating profit for 2016. The No. 3 global player in semiconductors overall celebrated a third straight quarter of record-high sales, operating profit and net income.

And yet the quarterly operating profit fell short of an analysts’ consensus estimate of 3.82 trillion won compiled and released by stock information provider FnGuide on Monday. Revenue came in above an estimate of 7.94 trillion won.

The chip-making arm of SK, which was acquired in 2012, cited a 17 percent increase in DRAM shipments in the quarter from the previous quarter and an increase in average selling price by 6 percent thanks to seasonal demand for mobile products as well as strong demand from the server sector.

“We have adjusted the growth rate of DRAM demand for this year from the initial early 20 percent level to the mid 20 percent level after demand for server DRAMs rose much more than expected,” said Lee Seok-hee, chief operating officer of SK Hynix, in a conference call Thursday morning. “DRAM shipments next year are expected to maintain an early 20 percent level next year too.”

“DRAM supply has been tight on account of the slowdown in technology migration and a conservative stance towards capital spending as DRAM suppliers aim to keep their profits high,” said market researcher TrendForce in its 2018 industry market forecast released on Thursday.

Propped up by the launch of new smartphones in the quarter ending September, NAND shipments also climbed 16 percent quarter on quarter, according to SK Hynix. But the average selling price decreased 3 percent from the previous quarter.

NAND remains a weak spot for the company. Its market share as of the second quarter was 10.6 percent, according to market researcher DRAMeXchange. Samsung was No. 1 with 38.3 percent of the market, followed by Toshiba with 16.1 percent.

SK Hynix is joining a Bain Capital-led consortium that is purchasing Toshiba’s memory unit for 2 trillion yen ($17.6 billion). SK Hynix is investing 395 billion yen. Part of the investment will come in the form of convertible bonds, which could allow the SK subsidiary to take an equity stake of up to 15 percent in the Japanese chipmaker in the near term.

The company vowed to place its focus on server and mobile products, which are expected to lead demand.

Shares of SK Hynix ended 3.67 percent down at 78,700 won on Thursday. The share price has nearly tripled over the past year.


BY SEO JI-EUN [seo.jieun@joongang.co.kr]