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(2nd LD) SK hynix's Q4 net plunges on weaker demand

All News 10:39 January 26, 2016

(ATTN: ADDS photo, details in para 6, 14; UPDATES share price)
By Kang Yoon-seung

SEOUL, Jan. 26 (Yonhap) -- South Korean chip giant SK hynix Inc. said Tuesday its fourth-quarter profit fell 46.3 percent from a year earlier due to falling shipments of dynamic random access memory (DRAM) chips and other major products.

Net profit came to 871.3 billion won (US$727 million) in the October-December period, compared with the profit of 1.6 trillion won posted the previous year, SK hynix said in a regulatory filing.

Sales shed 14.2 percent on-year to 4.4 trillion won in the fourth quarter, and operating profit also crashed 40.7 percent to 988.8 billion won, compared with 1.6 trillion won posted last year.

For all of 2015, net profit edged up 3.1 percent to 4.3 trillion won, with its sales increasing 9.8 percent to 18.7 trillion won. Its operating performance inched up 4.4 percent to 5.3 trillion won.

The annual performance is in line with market estimates. Local brokerage houses expected a net profit of 4.2 trillion won and an operating profit of 5.3 trillion won, according to data compiled by Yonhap Infomax, the financial arm of Yonhap News Agency.

SK hyinx's combined net profit, operating income, and sales for last year marked all-time high levels, continuing to set a new record for the third consecutive year. The company saw its net and operating profit reach 2.8 trillion won and 3.3 trillion won in 2013.

The fourth quarter, however, marked the first time for SK hynix to post a quarterly operating profit that fell below the 1-trillion won mark since the January-March period of 2014.

SK hynix had been enjoying robust operating profits on the back of favorable DRAM prices. The quarterly operating profit reached a record 1.6 trillion won in the fourth quarter of 2014.

SK hynix said the plunge in the fourth-quarter bottom line is attributable to sluggish shipment of major products.

Shipments of its DRAM products fell 1 percent on-quarter, while sales of NAND flash goods shed 4 percent. The average price of DRAMs and NAND flash decreased 10 percent and 15 percent, respectively, on-quarter in the October-December period, it added.

The company said its sales of memory chips will likely remain flat in the first quarter due to the falling seasonal demand, casting a cloud over the immediate recovery of its performance.

SK hynix, however, said its NAND flash business is expected to recover this year despite the falling demand from the mobile segment due to a growing market for solid state drives, which are more expensive than traditional memory storage systems but have faster read and write speeds because they use NAND flash memory,

The company said it will also start full-fledged production of DRAMs using 20-nano level technology, and speed up efforts to adopt 10-nano level production. A lower number indicates more efficient production.

"The development of the 10-nano-level production will be completed in the second half of 2016," an official from SK hynix said. "Although mass production will not begin this year, we do plan to start it early next year."

SK hynix said it will invest 6 trillion won this year to cope with slowing global demand that is set to spark intense competition with rivals. Industry watchers said Chinese tech giants will soon emerge as the major drag on South Korean chipmakers.

Shares of SK hynix advanced 1.61 percent to 28,450 won as of 10:23 a.m. The earnings result came before the opening of the stock market.


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