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(4th LD) SK hynix posts second-highest quarterly earnings for Q1

All Headlines 15:38 April 24, 2018

(ATTN: UPDATES share price)
By Kang Yoon-seung

SEOUL, April 24 (Yonhap) -- SK hynix Inc. said Tuesday its first-quarter net profit advanced 64.4 percent on-year to post its second-highest quarterly report ever, helped by the continued industrywide boom around the globe.

Net profit came to 3.1 trillion won (US$2.89 billion), rising 64.4 percent from 1.89 trillion won posted a year earlier, South Korea's No. 2 chipmaker said through its regulatory filing.

Operating profit increased 77 percent over the cited period to 4.36 trillion won. Although the figure slightly fell behind the record-high quarterly figure of 4.4 trillion won posted in the October-December period last year, it still marked the second-highest earnings ever posted by SK hynix.

Sales moved up 38.6 percent to 8.71 trillion won, the company added.

The first-quarter net profit was around the market's consensus of 3.4 trillion won, compiled by Yonhap Infomax, the financial arm of Yonhap News Agency, on 19 local brokerage houses.

The operating profit-to-sales ratio, which indicates the profitability, reached 50.1 percent, marking the first time that it surpassed the 50 percent mark.

The growth was apparently driven by the continued growth in demand for server products, with the delayed mass production by Chinese rivals also limiting the supply in the market, industry watchers said.

SK hynix said although its products maintained favorable prices in the market in the first quarter, which is considered a low-season for the industry, the overall shipment of DRAM and NAND flash products fell, leading to on-quarter decrease of sales and operating profit at 3 percent and 2 percent, respectively.

The company said its shipments of DRAM chips decreased 5 percent on-quarter despite the strong demand, due to the lower number of production days in February coupled with weaker demand from the mobile segment. The average sales price advanced 9 percent throughout all products in the sector.

As for the NAND flash products, shipments fell 10 percent on-quarter, with the average price decreasing 1 percent over the cited period.

Industry watchers said SK hynix's sound first-quarter earnings are still significant as they came amid the trade dispute between Washington and China, along with the slowed growth in the price of memory chips. SK hynix is likely to maintain growth on the back of gradually increasing demand for server and mobile chips, they added.

For the remainder of 2018, SK hynix said the sever products are anticipated to lead the company's growth, as Internet data-center operators are expanding investment around the globe.

As for the mobile products, SK hynix said the growth in demand is likely to slow amid the saturation of the smartphone market. The company, however, expected the number of chips adopted by a smartphone will continue to rise as new devices come with high-end features adopting artificial-intelligence technologies.

The chipmaker predicted the NAND flash segment will also expand on the back of the enterprise SSD segment. SK hynix said businesses will account for nearly half of the overall demand for SSD products this year.

With NAND flash products also being installed on budget 128-gigabyte smartphones, SK hynix said the demand will likely rise further.

"This year, global demand for DRAM chips will rise in the 20 percent range," the company said. "Despite the industry's efforts to improve production technologies and more investments being made, the supply will still not be sufficient (to meet the market's demand)."

SK hynix said it will complete the construction of a new factory in Cheongju, 137 kilometers south of Seoul, as well as the expansion of its Chinese line to cope with the rising demand.

"SK hynix will place its focus on expanding leading edge technologies and diversifying product portfolio to actively respond to the market demands. Therefore, it will consistently expand the portion of 1Xnm and hit its stride in the sales of 1Xnm server and graphics DRAM," the company said.

Shares of SK hynix closed 2.73 percent lower at 82,100 won. The first-quarter report was announced before the market opened Tuesday.

(4th LD) SK hynix posts second-highest quarterly earnings for Q1 - 1


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