SK hynix estimated to post record-high operating profit

By Kang Seung-woo

The operating profit of SK hynix is estimated to top the 2 trillion won ($1.75 billion) mark in the first quarter amid a boom in the memory chip market, according to watchers, Monday.

It would be the first time for SK Group’s semiconductor affiliate to post more than 2 trillion won in profits since the once money-losing company was acquired by the nation’s third-largest conglomerate in 2011.

Its previously highest operating profit was 1.66 trillion won in the fourth quarter of 2014.

“SK hynix is anticipated to reach 2.5 trillion won in the operating profit of the January-March period thanks to surging prices for DRAM and NAND flash memory,” Meritz Securities analyst Lee Jin-woo said.

Yoo Jong-woo, an analyst at Korea Investment and Securities, also forecast that the chipmaker is sure to come up with a record-high operating profit at over 2 trillion won.

“The first-quarter operating profit is expected to reach 2.3 trillion won thanks to an unheard-of spike in DRAM and NAND flash prices compared to the previous quarter,” he said.

Yoo estimated that the DRAM prices grew by 18 percent, while that of NAND gained by 9 percent quarter-on-quarter.

On a more positive note, its profit is likely to improve down the road.

“Beating expectations, SK hynix is forecast to chalk up 2.8 trillion won in the second-quarter operating profit,” said Park Yu-ak, an analyst of Kiwoom Securities.

According to Park, 2.4 trillion won is expected to come from DRAM and 424 billion from NAND flash memory.

An industry tracker’s estimate also offers a rosy outlook.

IHS Markit predicts that the boom in the memory chip market will stretch into next year as the size of the global semiconductor demands is expected to surpass $100 billion this year, up 25 percent from last year’s $80 billion.

According to the consultancy, the sales of DRAM will increase from $41.5 billion in 2016 to $55.3 billion this year and $57.8 billion in 2018, while the NAND industry will see its sales grow from $48.5 billion this year to $49.2 billion won in 2018.

3-way competition for Toshiba

SK hynix is the world’s second-largest DRAM supplier in terms of market share in the fourth quarter of last year, but it was a distant fifth in the NAND sector.

DRAMs are used widely in personal computers, while NAND flash memory chips are mainly used in smartphones and other mobile devices.

To boost its competitiveness in the NAND flash business, SK is bidding to take over the memory operation of Toshiba, the world’s second-largest maker of NAND flash memory chips.

Along with the Korean company, global IT giants including Google and Apple are interested in the deal, and SK is likely included in the shortlist.

Walter Coon, director for IHS Markit’s NAND flash technology research, said last week that SK is expected to remain one of the three finalists together with U.S.-based Micron Technology and Western Digital, adding that none of them currently hold a strong advantage.

Bloomberg also reported, Friday, that the Tokyo-based company had narrowed the number of bidders to a smaller group including hynix.

Toshiba is set to give up its NAND operation to offset ballooning losses from its nuclear energy operation in the United States.

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