Hynix returns to profitabiliy on DRAM price recovery

Amidst signs the DRAM chip memory market is recovering and could soon return

to boom market status, South Korea's Hynix Semiconductor announced it earned $83

million in the first two months of this year, a sharp turn-around from the

company's performance in 2001 when it lost some $3.2 billion.

"A rebound in chip prices helped us return to operating profit in

January and February of this year," a company spokeswoman said. The results

could harden Hynix's negotiating position in the on-going merger talks with

Micron, which has offered to pay some $4 billion for all of Hynix.

Ironically, the positive results may cause Hynix's banks, who are owed

between $6 and $7 billion, to push Hynix management for a quick deal with

Micron. The banks are not interested in seeing Hynix as an independent company.

The merger with Micron would enable them to cut their losses and ties with the

company which has been a huge drag on their own financial results.

Hynix plans to continue with only non-memory chip lines after selling the

memory units to Micron. The overall memory market could see a strong recovery

this year, according to a new survey released this week by the iSuppli market

research firm.

iSuppli predicts that 2002 DRAM revenues will increase by more than 55 per

cent for the year to more than $17.3 billion. iSuppli senior analyst Nam Hyung

Kim said "Consolidation within the DRAM business over the past several

months allowed suppliers to rein in excess production capacity very rapidly to

better match the continuing uncertain demand patterns."

The average sales price of 126 megabit DRAMs has risen to $4.50 in early

march, three times what they fetched last November. "PC OEMs will remain

the market driver for DRAM revenues for some years to come," Kim noted.

"Windows XP is driving memory content in the average system from less than

170 Mbytes to more than 220 Mbytes right now, and the white box and module

makers are enjoying the XP wave with record demand for memory pgrades spurring

DRAM consumption."