By Kim Yoo-chul
ICHEON, Gyeonggi Province ― Hynix Semiconductor, the world's second-largest supplier of computer memory chips, aims to pay cash dividends for the fiscal year of 2011 as it expects a steady recovery throughout this year.
It's rare for chipmakers here to pay cash dividends as the sector is highly volatile and cyclical. They tend to use the liquidity as a cushion for survival amid sequential market downturns.
Hynix CEO Kwon Oh-chul, however, is quite upbeat on paying dividends for the second straight year based on his bullish outlook for the market.
"Chips are a cash-intensive business and also require bigger investments of profits into facilities. But, it's desirable to pay dividends this year as part of corporate consistency," said Kwon, Wednesday.
The top executive, however, declined to unveil the amount that he has in mind.
Kwon was speaking on the sidelines of the company's annual shareholders' meeting at its technology compound in Icheon.
At the meeting, Hynix announced that it will pay a dividend of 150 won per share of common stock to shareholders.
The dividend rate to market price is 0.6 percent and the total amount is 88.5 billion won. This is the first-ever dividend payout in Hynix's corporate history.
"The global DRAM market has already hit rock-bottom and is showing gradual recovery. NAND flashes will experience some corrections, however, we expect the overall market to grow from the latter half of this year," Kwon told reporters in a separate news conference.
Hynix sees macro-economic uncertainties and the rising Korean won against the greenback as posing some threats, although it expects a limited impact.
The global memory chip sector was in sluggish moves since the latter half of last year mostly due to a fall in prices of DRAMs amid rising inventories.
"Hynix is still maintaining a healthier inventory level. We have around 45-days of wafer inventory, which is manageable," the executive said.
Under such a business outlook, Hynix plans to lower its debt more than its previous target of 600 billion won.
"Our total debt was 5.9 trillion won currently, which is the EBIDTA level of 6 trillion won. If Hynix gets more profit than expected, then we may further lower the debt," added the chief executive.
He declined to elaborate because the Korean firm has been spending more on technology development to widen the gap with its Taiwanese and Japanese rivals.
Kwon said Hynix will boost the portion of its very-fine DRAM chips made using 30-nanometer processing technology by 40 percent by the end of the year.
"Within the latter half, we will finish the development of 20-nanometer level technology," Kwon said.
In chip-making, thinner is better as it cuts manufacturing costs allowing companies to charge bigger buyers more. Top companies including Hewlett-Packard (HP), Dell and Apple are Hynix's critical buyers.
Kwon said he sees little imminent impact on wafer supplies from the massive earthquake in Japan, however, he warned that an extended crisis would probably hit Hynix’s big buyers.
"Production struggles seen by our Japanese rivals including Elpida and Toshiba aren't long-term ones. That's why we don't see any imminent impact," he said, adding a negative impact could occur if the crisis continues for more than two months.
When asked for guidance on its first quarter earnings, the CEO said; "Quarterly sales were similar compared to the previous quarter. We shipped more chips during the latest quarter, however, prices were lower."
In the fourth quarter last year, Hynix said operating profit fell 41 percent to 417.6 billion, while sales declined to 2.75 trillion.
Analysts expect Hynix to post an operating profit of some 260 billion in the first quarter on sales of 2.8 trillion.