UPDATE 2-Hynix posts 1st quarterly loss in 4-½ years

(Adds company and analyst comments, share prices)

By Marie-France Han and Rhee So-eui

SEOUL, Feb 1 (Reuters) - Hynix Semiconductor Inc, the world's No. 2 memory chip maker, reported its first quarterly loss in 4-½ years on Friday, as chip prices went into a tailspin and the near-term outlook for the sector remains bleak.

Prospects for Hynix (000660.KS) and bigger rival Samsung Electronics Co Ltd (005930.KS) are grim until at least the middle of the year as the cutbacks in capital investment by major chip makers will take a few months to be felt.

Most analysts still expect Hynix to post losses for the current period and probably the second quarter.

"Chip prices are still falling in the first quarter, although at a slower pace, which means their results will be worse," said Park Hyun, an analyst at Prudential Investment & Securities. "The company will have to come up with a plan to cut costs significantly."

Hynix and its overseas subsidiaries posted a 465 billion won ($492.8 million) net loss for the quarter to Dec. 31, compared with a record 1 trillion won profit booked a year ago and a 319.7 billion won loss forecast by nine analysts polled by Reuters.

The loss was Hynix's first since the second quarter of 2003.

Home rival Samsung's chip division saw its operating profit drop 74 percent in October-December from a year earlier, while Micron Technology Inc (MU.N), the top U.S. maker of memory chips, reported a net loss of $262 million in its first fiscal quarter, missing analyst forecasts.

Hynix said it expected the first quarter to be "challenging", but added that it was seeing signs of slashed investment in the sector, which would help reduce the current oversupply.

The company forecast another year of significant price drops, with prices of dynamic random access memory (DRAM) chips, used mainly in personal computers, falling 35 to 40 percent on the year and NAND-type flash chip prices, popular in digital cameras, diving 45 to 50 percent. Still, the drops would be smaller than in 2007.

Shares of Hynix, valued at about $12 billion, fell 2.5 percent to 25,350 won at 0217 GMT, against the wider market's 0.53 percent rise.

For more details on the earnings report, please visit: ">here

'CHALLENGES AHEAD'

After a disastrous 2007 during which some of their flagship products fell more than 90 percent amid a growing oversupply, makers of DRAM chips are attempting to restore profitability.

"Execution will be the main issue" in Hynix's drive to cut costs further by moving to more and more intricate chip designs, said Yu Chang-eyun, an analyst at BNP Paribas. "There's a lot of challenges ahead for them."