Hynix sees revival of chip sector

SEOUL, SOUTH KOREA: South Korea's Hynix Semiconductor Inc forecast further recovery in the memory chip sector on rising demand and limited supply growth, as the world's No. 2 computer memory chip maker posted higher-than-expected quarterly profits.

Leading makers of dynamic random access memory (DRAM) chips are set to enjoy a full-blown revival this year as the improving global economy lifts corporate demand for personal computers.

Supply growth will be limited as chip makers refrained from new investment during the lengthy downturn, with top players Samsung Electronics Co Ltd and Hynix benefiting from advanced technologies that produce high-end chips at low cost.

"The industry is in good shape. Demand is strong in the first quarter not only for the main computer memory for but for NAND flash memory," said Kim Young-gak, an analyst at Hyundai Securities.

"Foreign rivals will take time to catch up with leading Korean makers. It is premature to worry about oversupply now."

Hynix competes with home rival Samsung, Japan's Elpida Memory Inc and Taiwan's Powerchip.

Hynix shares rebounded from early losses to trade up 2.2 percent by 0112 GMT, against the wider market's .KS11 0.2 percent loss. Optimism over future business outweighed initial profit taking, analysts said.

The stock has risen about 11 percent so far in January after more then trebling in 2009, as the memory chip industry rebounds from one of its most severe downturns.

Hynix shareholders, formerly its creditors, plan to pick a buyer for up to 28 percent stake in the chip maker in the first half of this year. The sale is targeting domestic buyers although foreign investors are expected to be allowed to join as financial investors.

"DRAM demand is expected to show strong growth this year," Hynix Chief Financial Officer M.C. Kim said during a conference call.

"The PC market is anticipated to continue its momentum by growing in the mid-teen percent," he said, citing corporate PC demand and the impact of the new Windows operating system.

Hynix aims to increase its DRAM shipment faster this year than the average 40-50 percent growth seen for the entire industry, while also matching or outperfoming the industry in NAND flash memory.

Profits up, sales at record

Hynix posted a 708 billion won operating profit in the fourth quarter to December on a consolidated basis, higher than a consensus forecast of a 630.4 billion won profit from Thomson Reuters I/B/E/S.

The result compares with a 802 billion won operating loss a year earlier and a 209 billion won profit in July-September. Hynix returned to profit in the third quarter last year after suffering seven consecutive quarterly losses.

Fourth-quarter net profit was 657 billion won, slightly above a consensus forecast. Consolidated quarterly sales came at 2.8 trillion won, its highest-ever.

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Hynix is expected to post a 1.75 trillion won ($1.54 billion) consolidated net profit in 2010, reversing a 333 billion won net loss for all of 2009, according to Thomson Reuters I/B/E/S.

On Wedneday, rival Powerchip reported an unaudited net profit of more than T$1.6 billion ($50 million) in the fourth quarter of 2009, beating market forecasts for a loss.