SK Hynix is feeling the brunt from waning demand, worsening US-China chip war

SK Hynix is feeling the brunt from waning demand, worsening US-China chip war.Source: Reuters

S.Korea’s SK Hynix tips strong 2017 as chipmakers ride demand surge

SOUTH Korea’s SK Hynix Inc. on Thursday reported its best quarterly profit in nearly two years and guided for a strong 2017, joining other chipmakers in an earnings bonanza as smartphones and data servers demand ever more processing power.

The world’s second-largest memory chip maker behind Samsung Electronics Co. Ltd. warned that DRAM chip supply growth may not keep up with demand and said NAND chip shortages would persist into the first half of the year.

Analysts and investors are betting on a major memory industry boom, with some predicting record profits for companies such as Samsung and SK Hynix as chipmakers struggle to keep pace with surging demand for more processing and storage capacity.

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“SK Hynix expects the favourable memory market conditions that emerged in the second half of last year to continue this year,” the company said in a statement.

SK Hynix said in a regulatory filing its fourth-quarter profit was 1.5 trillion won (US$1.29 billion), the highest since the first quarter of 2015. The result topped the average forecast of 1.3 trillion won from a Thomson Reuters I/B/E/S survey of 27 analysts.

The firm’s stock traded at an almost 15-year high of 53,500 won following the announcement, mirroring gains seen by industry peers in recent months as soaring memory chip prices boost hopes for fatter margins and bigger profits.

Industry consolidation and careful capacity management make a major increase in supply unlikely anytime soon, analysts say.

Samsung Electronics on Tuesday reported record earnings from its chips division, and the firm’s stock traded at a record high on Thursday. Micron Technology also in December gave stronger-than expected revenue and profit forecasts, while Toshiba Corp. swung to a profit in the July-September quarter due to memory chip demand.

“For DRAM, demand is strong for the first half overall and we are not able to fully meet that demand through our production capabilities,” SK Hynix Vice President Sean Kim said.

The firm would keep inventory levels tight, he added.

The South Korean firm said shipments of DRAM chips, used widely in personal computers, rose 13 percent during the fourth quarter from the previous period, while the average price jumped 14 percent.

Shipments of NAND chips, used for long-term data storage on electronics including smartphones, fell 3 percent while the average price also rose 14 percent.

Revenue for the fourth quarter leapt 21 percent from a year earlier to a record 5.4 trillion won. The firm also said it will pay a end-2016 dividend of 600 won per share. – Reuters