SK Hynix in smaller-than-expected loss, mobile chips help

SEOUL Tue Oct 23, 2012 11:10pm EDT

SEOUL (Reuters) - South Korea's SK Hynix Inc (000660.KS) booked a smaller-than-expected quarterly operating loss on a jump in demand for chips used in mobile devices like Apple Inc's (AAPL.O) iPad and iPhone, sending its shares up 4 percent.

The results bode well for the current quarter, with analysts expecting Hynix will return to profit as a host of new mobile products hit the stores ahead of the year-end holiday season, offsetting waning demand for PCs and traditional computer chips.

Those new devices will include Apple's iPad mini, a new version of the iPad and Microsoft's (MSFT.O) new Windows-based smartphones and tablets.

"The market didn't expect Hynix's product mix to have changed this favourably," said Hwang Min-sung, an analyst at Samsung Securities.

"In light of this, the market will have to revise up its predictions for fourth-quarter earnings."

The world's No.2 computer memory chipmaker posted an operating loss of 15 billion won ($13.6 million) for the three months ended September, compared with a consensus forecast for a loss of 57 billion won from 15 analysts surveyed by Reuters.

Hynix, which competes with sector leader Samsung Electronics (005930.KS) and Japan's Elpida Memory Inc, had managed a profit of 23 billion won in the previous quarter but that had followed three quarters of losses.

BETTER SELLING PRICES

Mobile dynamic random access memory (DRAM) chips now account for more than 30 percent of its total DRAM revenue, up from 20-25 percent in the previous quarter.

And while many chipmakers have been hit hard by the consumer shift away from personal computers to tablets, declines in selling prices were not as sharp for Hynix.

Its average selling price for DRAM chips fell 8 percent in latest quarter compared with an industry-wide level of 14 percent. DRAM chips account for around 70 percent of Hynix's revenue while NAND flash memory chips account for around 25 percent.

Average selling prices for NAND chips rose 4 percent, while shipments grew 5 percent.

Hynix may also benefit somewhat as Apple diversifies away from Samsung, with which it has clashed over patents.

"Perhaps in NAND flash memory chips... Hynix will benefit slightly from Apple moving away from Samsung as a supplier. Apple is not the best customer to supply to, because they drive a hard bargain with prices, but ultimately (tight) capacity will drive prices," said Hwang.

Bolstered in part by hopes of better earnings from mobile chips, Hynix shares have risen 15 percent over the past three months, outpacing the broader market .KS11, which gained 7 percent. Its shares were 4 percent higher on Wednesday compared with a 1 percent decline for the broader market. ($1 = 1103.1000 Korean won)

(Editing by Edwina Gibbs)

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