SK Hynix Posts Record Profit on Resilient Chip Demand

(Bloomberg) -- SK Hynix Inc. posted record profit on booming sales of memory chips and a weakening won that boosted the value of overseas sales.

Operating income rose to 5.6 trillion won ($4.9 billion) in the three months ended June, according to results released Thursday from the Icheon, South Korea-based company. That compares with the 5.3 trillion-won average of analysts’ estimates compiled by Bloomberg.

The second-quarter results reinforce optimism that demand for memory chips remains resilient after a spike in prices led to record earnings last year. The sharp depreciation of the won in June also helped boost earnings for the South Korean company that supplies chips to companies from Apple Inc. to Huawei Technologies Co. The shares of Hynix rose as much as 1.7 percent in morning trade.

“Production costs stayed low while prices remained favorable,” said Hwang Min-seong, an analyst at Samsung Securities. “A weakening won helped, but it’ll prove more helpful in the third quarter. Overall, demand continues to increase with more data being handled by everything from servers to smartphones.”

Sales for the second quarter climbed to 10.4 trillion won, compared with the 10.2 trillion won predicted by analysts.

Contract prices for 32 gigabyte DRAM server modules climbed 2.8 percent in the June quarter from the March period, which saw them rise 5.6 percent. Prices for 128 gigabit MLC NAND flash memory chips fell about 9 percent, according to inSpectrum Tech Inc.

Samsung Electronics Co. leads Hynix in the dynamic random-access memory market and Hynix is looking to the fast-growing NAND flash memory market to boost its profile. Hynix is part of a Bain-led group chosen to take over Toshiba Corp.’s semiconductor unit, which in May received regulatory approval from China for its 2 trillion yen sale.

Hynix is also forging ahead with investments to boost production to meet what it expects to be resilient demand for memory chips. The company’s capital expenditures next year are forecast to be slightly less than this year, executive vice president Lee Myoung-young said on a conference call.

Hynix faces an investigation over allegations of collusion in chip sales with Samsung and Micron Technology Inc. in China, the world’s biggest consumer of semiconductors. China is also trying to expand its own chip industry and reduce the country’s reliance on foreign technology. In a bid to appeal to Chinese consumers, Hynix said earlier this month that it would set up a foundry in Wuxi, China next year in a joint venture with the investment arm of the local government.

©2018 Bloomberg L.P.