By Kim Yoo-chul
Staff reporter

Hynix Semiconductor, the world's second-biggest maker of dynamic random access memory (DRAM) chips that are widely used in computers, is relieved over the favorable reception over its renewed investment plans in financial markets.

The Icheon-based chipmaker is the latest among global chipmakers to boost its capital spending to exploit an energized chip market.

Financial analysts say that the rare expression of boldness from Hynix inspires confidence in the company's immediate future, as the new investment would be crucial for smoothing the transition toward advanced chips and manufacturing technologies and also improve the company’s flexibility in combating a possible oversupply situation in the chip market.

Bank of America Merrill Lynch said it will maintain its target price for Hynix of 45,000 won Tuesday and keep the "buy" rating on the company's shares.

Merrill Lynch doesn't expect "any significant risks" that may hurt the chipmaker’s cash-flows and rated the updated investment plan as satisfactory.

Merrill Lynch maintained strong guidance for Hynix's second quarter earnings, citing lower inventories and the strong demand for more powerful DDR3 DRAM chips, which may be enough to offset the macroeconomic risks related to the south European debt crisis or fluctuation in chip prices.

The memory chip industry is highly volatile and cyclical. External factors such as macroeconomic situations are the key measurement to gauge the profitability of the involved players, which also are a crucial factor in the investment plans for chipmakers.

Hynix recently said it plans to increase its spending on chips to 3.05 trillion won ($2.5 billion) by the end of the year, up from its earlier plans for 2.3 trillion won. Last year, Hynix spent just 1 trillion won due to the industry's downturn.

"That's a reasonable amount. Hynix needs some more money to sharpen its chip-making technologies and achieve better product mix-ups," Seo Won-seok, an analyst at NH Securities, said.

"We interpret the upped investment as an ambitious move by the company to maintain its lead over rivals amid tight supplies in DRAM chips and the rising demand for computers."

SK Securities is also upbeat about Hynix’s prospects, based on a forecast of chip prices remaining strong, driven by jolted demand from personal computers, both in consumer and corporate markets.

"We don't see that Hynix will face strong resistance from buyers for an additional price charge thanks to the bullish market," SK Securities said.

Chipmakers usually negotiate with their clients twice a month over chip prices, and when the sector falls into a downturn, the vendors offer chips at discounted prices. The tables are turned when times are good.

"Foreign investors are in the final stage of offloading Hynix shares. Worries of an oversupply have emerged due to aggressive investments by chipmakers. But only a few have the capability to boost their expenditure," SK Securities said

Days ago, U.S.-based asset manager AllianceBernstein sold off a 1 percent stake in Hynix, reducing its stake in the company to 4.3 percent.

There have been grumblings that AllianceBernstein, along with some other foreign investors, had been attempting to drag down the price of Hynix shares, although a company spokesman declined to comment on this.

Hynix trails Samsung Electronics, which is the world’s largest memory chip maker, and ahead of Toshiba in DRAMS. In NAND-type flash memory chips, which are used in smartphones and other portable devices, Hynix is currently in the No. 3 slot.

The firm reported its biggest quarterly profit in more than three years in the January-March period helped by such favorable market situations.

Analysts have no big questions that Hynix will post another record profit in the second quarter.