* Q2 operating profit 1.1 trln won vs 916 bln won forecast
* Says finalised Q3 chip sales contract with higher prices,
uncertain on Q4
* To boost flash memory chip output
* Forecasts strong demand for DRAM, NAND chips to continue
By Miyoung Kim
SEOUL, July 25 South Korean chipmaker SK Hynix
Inc warned on Thursday soaring prices of computer
memory chips may come to an end soon, as a year-long rally
helped it report a forecast-beating record quarterly profit and
The key Apple Inc supplier's prediction of a
slowdown in chip price growth means investors may have to brace
for more normalised profits from chipmakers going forward,
although the industry remains well-placed to cope with any
Prices of commodity dynamic random access memory (DRAM),
used in personal computers, have almost doubled so far this year
even as global PC shipments have slumped, thanks to years of
cautious investment designed to keep supply in check and the
conversion of factory capacity to more profitable chips used in
smartphones and tablets.
"We expect DRAM shortages will continue even into the fourth
quarter, and in normal circumstances, prices have to go up,"
Park Nae-hak, vice president and head of Hynix's mobile and
consumer marketing, told analysts.
"But given that they've been rising for the past one year,
memory chip prices now account for too big a portion of our
clients' total materials costs. So there's a bit of uncertainty
regarding how much prices can actually go further from here."
Park said Hynix had already finalised most of its DRAM sales
contracts for the third quarter at higher sales prices thanks to
chip shortages. DRAM chips generate 73 percent of the company's
Reflecting concerns of slowing growth, sellers pounced when
Hynix shares rose as much as 2.5 percent after the record
earnings announcement. The stock was up 0.4 percent in a flat
market at 0205 GMT.
The firm said it expected shipments of mobile DRAM chips to
surpass computer DRAMs for the first time next year, reflecting
the shift in consumer electronics away from bulky PCs and
towards tablets and smartphones.
In response to growing mobile demand, Hynix said it would
increase flash memory chip output and forecast its shipments of
the semiconductors used in mobile devices would rise by around
20 percent in the third quarter. It expected DRAM chip shipments
to grow only about 5 percent.
Manufacturers are rushing to boost flash memory chip
production to ride a boom in the mobile devices market driven by
emerging economies like China, the world's biggest smartphone
market, where strong demand for cheap handsets is offsetting
slower high-end sales growth in more mature markets.
Toshiba said earlier this month it was considering investing
up to 30 billion yen ($299.5 million) on new equipment to
manufacture flash memory chips.
"We think overall market expectations for the high-end
smartphone market were too bullish. But low-end segment growth
is quite solid and we stick to our previous forecast of the
overall smartphone market for this year at 960 million units,"
That represents nearly 30 percent growth from 2012.
Hynix, which competes with bigger rival Samsung Electronics
Co Ltd, Japan's Toshiba Corp and U.S.-based
Micron Technology Inc, reported 1.1 trillion won ($988.5
million) in operating profit for April-June, beating analysts'
consensus forecast of 916 billion won.
The result, based on a record gross margin of 38 percent,
marks a sharp improvement from a tiny 5.2 billion won profit a
year ago and 317 billion won profit in the previous quarter.
Sales jumped 49 percent to a record 3.9 trillion won, easily
beating a 3.6 trillion won forecast.
The better-than-expected earnings were partly attributed to
increased sales of more profitable mobile DRAM chips and NAND
flash chips. The portion of DRAM chips used in personal
computers dropped to slightly more than 30 percent of the
company's total DRAM sales.
Hynix said strong demand for DRAM and NAND flash chips would
continue in the second half, largely thanks to new smartphone
launches and growing sales of devices with larger data storage
($1 = 1112.8500 Korean won)($1 = 100.1650 Japanese yen)