DRAM price would fall, warns Hynix Semiconductor

SEOUL, S.KOREA: Hynix Semiconductor, the world's No. 2 memory chip maker, warned prices would fall this quarter, sending its shares to a two-month low as the industry braces for weaker profit growth.

Hynix posted a record quarterly profit on Thursday, but said it expected prices of DRAM (dynamic random access memory) to fall sequentially in the third quarter, as consumer spending is set to decrease on growing economic uncertainty and production ramps up.

“Investors are growing worried that Hynix's third quarter earnings momentum will slow," said Han Seung-hoon, an analyst at Korea Investment & Securities. “Chip pricing is seen weak while expected shipment growth is not that impressive.”

Hynix shares fell 3.4 per cent to their lowest since May. Hynix, which trails sector leader Samsung Electronics and competes with Japan's Toshiba Corp and Elpida Memory, makes DRAM and NAND-type flash memory. DRAM chips go into computers and servers, while NAND flash is found in gadgets such as Apple's iPhones.

The weaker price outlook comes as Hynix expects DRAM shipments to grow by mid-single digit percent in the third quarter from the previous three months, while NAND shipments will be up by around 20 percent during the same period, company officials said.

"Due to the current economic situation, demand for consumer PCs will be impacted somewhat," Park Nae-hak, Hynix's vice president of marketing, told an investors' conference call. "Our DRAM chip prices would fall slightly in the third quarter and the market's overall drop will be more than that." Top memory chip makers have been posting robust growth so far this year, but some analysts doubt the trend will persist because of concerns about European demand, decelerating growth in some Asian markets and the possibility of a memory chip glut.

Hynix reported consolidated record operating profit of 1.0 trillion won ($830.9 million) in the April-June quarter, beating a consensus estimate of 973 billion won based on Thomson Reuters I/B/E/S. The figure was higher than a 799 million won profit in the previous three months and compared with a 211 billion won loss a year earlier.

Net profit for the quarter was 665 billion won, compared with a loss of 58 billion won a year earlier, while revenue was just over 3 trillion won, in line with forecasts. Hynix shares fell 6.2 percent in the April-June quarter, underperforming the Korea Composite Stock Price Index's 0.3 percent gain. Former Hynix creditors, now shareholders, own 20 percent of the company and plan to sell 5 percent this year.

Earlier this month, the world's biggest chip company Intel and Apple gave upbeat outlooks, saying renewed corporate spending and demand from Asian consumers would help sales. Hynix said corporate PC demand remained solid, but consumer demand was likely to be impacted by the uncertain economic outlook. Nanya Technology, Taiwan's No.2 DRAM chip maker, on Wednesday lifted its capital spending forecast for this year by a third, raising concerns of accelerated supply growth.