PREVIEW-Asia memory chip earnings back on track, Samsung leads

* What: Hynix, Samsung, Toshiba, Elpida Q3 earnings

* When: Oct 23-Nov 5

* Sector leader Samsung to post surge in profits

* 2nd-tier manufacturers remain hard hit

* 2010 looks bright due to restrained output plans

By Marie-France Han

SEOUL, Oct 21 (Reuters) - Memory chip leaders Samsung
Electronics (005930.KS) and Hynix Semiconductor (000660.KS)
should post strong third-quarter earnings as chip prices
recovered, though some smaller manufacturers, hobbled by debt
and higher costs, face a tougher future.

The South Korean firms will see their third- and
fourth-quarter profit margins boosted by the upcycle in the
chip industry and their investment in technology that has left
rivals trailing.

"The technological gap between Samsung/Hynix and the rest
has grown from about six months in 2007 to 6-12 months now; it
will probably reach a full year by 2010," said Ricky Juil Seo,
an analyst at KB Investment & Securities.

Samsung is expected to report an operating profit margin of
around 15 percent in its semiconductor unit, five times higher
than in the second quarter and a big turnaround from a 17
percent loss margin in the first quarter.

World No.2 DRAM maker Hynix should swing back to a net
profit, helped by higher prices of its dynamic random access
memory chips (DRAM), widely used in personal computers.

In Japan, however, recovery will be slower at Toshiba Corp
(6502.T) and Elpida Memory 6665.T as the September surge in
DRAM prices may have come a little too late. Both are expected
to post quarterly net losses, though Elpida has said it would
post a July-September operating profit.

In Taiwan, where the government has stepped in and formed a
company to help bail out the industry, Powerchip (5346.TWO) is
on course for a 10th straight quarterly loss.

Both Powerchip and Nanya Tech (2408.TW) will post narrower
losses in the third quarter from the second, but chances are
slim that they will return to profit for the whole 2009.

Analysts have said loss-making DRAM makers will face cash
crunches in the months ahead, which could keep them from
investing in the newer technologies they need to stay
competitive. [ID:nTP145879]

Samsung and Hynix, with their deeper pockets, have
succeeded in building up engineering advances that the rest of
the industry is struggling to catch up with. They are spending
on technology to make more efficient and cheaper chips, as well
as faster and more powerful ones that could be the next money
spinners.

Overall, the 2010 outlook for the industry remains bullish
on the drastic capital investment cuts made by cash-strapped
companies over the past two years.

"There will be virtually no new investments for new lines
in 2010," said Koo Ja-woo, an analyst at Kyobo Securities,
meaning companies will rely solely on technology migration to
expand their output.

Koo also predicted growing demand from corporations which
had been refraining from new technological investments over the
past year and may need to upgrade with faster and more
energy-efficient computers and servers.

Q3 PROFIT/(LOSS) FORECASTS

Net profit (loss) Year ago Prior
quarter Oct 30 Samsung 3.3 trln won 1.2 trln
2.25 trln Oct 23 Hynix 271 bln won (1.65 trln)
(58 bln) Oct 30 Toshiba (8.8 bln yen) (26.85 bln)
(57.8 bln) Nov 5 Elpida (14.4 bln yen) (31.9 bln)

(44.5 bln) TBA Powerchip (T$5.74 bln) (T$15 bln)

(T$11.7 bln) (Additional reporting by Mayumi Negishi in
TOKYO, Baker Li in TAIPEI; Editing by Valerie Lee)