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| SK Hynix CEO Park Sung-wook |
By Yoon Sung-won
SK hynix, the world's second-largest memory chip maker, will focus more on high-performance memory chips to dispel concerns over uncertainties in the global semiconductor industry.
The company on Thursday said it will expand production of chips such as DDR4, LPDDR4 and NAND Flash for mobile and solid-state drives to compensate for sluggish demand in the DRAM market for PCs.
"To respond to the rapidly changing market condition, we will boost the production of DDR4 and LPDDR4 memory chips to meet expanding demand while reducing the manufacturing of DDR3 products," SK hynix President Kim Joon-ho said during a conference call, Thursday.
"We will also expand production of 10-nano triple level cell (TLC) NAND Flash memory chips and the second-generation 3D products. We will also speed up development of TLC-based third-generation products to meet the expanding 3D NAND Flash market."
According to the company's regulatory filing Thursday, it posted 1.375 trillion won ($11.83 billion) in operating profit in the second quarter, up 27 percent from a year ago.
Sales stood at 4.639 trillion won, up 18 percent in the same period. Net profit was 1.1 trillion won in the quarter.
Including SK hynix, the global semiconductor industry has suffered a decrease in DRAM prices, triggered by worse-than-expected demand for PCs. The company said the shipment and price of DRAM products had dropped 4 percent and 8 percent, respectively, from the previous quarter.
Forecasts are also negative because Microsoft's new operating system, Windows 10, and Intel's new core processor, "Skylake," scheduled for launch in the latter half of the year, are not expected dramatically to boost the PC market.
The company, however, remains confident about the profitability of high-capacity products for server applications and mid and low-priced smartphones.
"Rising uncertainties over the global economy and the possibility of changes in the global semiconductor industry's competitive composition have caused concerns," Kim said. "But we believe we can continue to achieve growth and generate profit on the back of our competitive edge in technology.
"Demand for high-capacity products, led by global Internet data center operators, as well as that for smartphones in emerging markets, will remain robust. The demand for NAND Flash memory chips is expected to expand for embedded products for budget smartphones. Solid-state drives will also become more popular as their prices are going down."
On Wednesday, SK hynix said it had decided to buy back 22 million treasury shares, which are estimated to be worth 859.1 billion won, to protect shareholder value.
The company's share price dropped sharply after China indicated it wants to enter the semiconductor industry by acquiring the world's third-largest memory chip maker, Micron Technology.
SK hynix said it may consider further buybacks to promote shareholder returns.
"We will actively consider buying back our treasury stocks when we are in a healthy financial condition and when our shareholder values significantly drop," the company said. "But we do not plan to acquire the treasury stocks regularly because we believe it is not right due to variability in the semiconductor industry.
"As we have announced that the buyback was done for long-term possession, we are not considering a cancellation. Also, we will not return the treasury stocks we bought to the stock market simply to increase stock supply."
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