SK hynix enjoys earnings surprise
By Kim Yoo-chul
SK hynix, the semiconductor affiliate of the SK Group, shifted to a surplus in the first quarter of this year on the back of robust sales of advanced chip-embedded digital gadgets, the company said Wednesday.
It said it has benefited from other suppliers migrating to mobile products like tablets and smartphones as it helped meet demand from customers still wanting PC and server chip components.
Its operating profit reached 317 billion won ($283.7 million), a major turnaround from the previous year’s 263.5 billion won loss. Consensus by market analysts for the firm’s operating profit was around 210 billion won.
Rising demand for advanced chip-embedded digital gadgets helped the company improve its quarterly revenue by 16 percent to 2.78 trillion won, year-on-year. Its net profit reached 179 billion won in the January-March period, reversing from a loss of 271 billion won the previous year,
The company is one of few survivors in a ``game of chicken’’ that has lasted in the last few years.
``Tight supply of DRAM chips and limited price falls in NAND flash chips resulted in us reporting a very impressive quarterly profit,’’ said Park Seong-ae, a spokeswoman for the Icheon, Gyeonggi Province-based outfit.
``Recent strength in DRAM prices, particularly PC DRAM, enabled the company to swing back into operating profit, beating market expectations. NAND also improved, but not as strongly as we expected. Net profit was hit by foreign exchange losses and increased tax expenses,’’ said Mark Newman, a senior analyst at Wall Street’s premier research firm Bernstein Research.
Helped by more chip orders from its major clients including Apple, shipments of SK hynix’s DRAM chips rose by 3 percent quarter-on-quarter, while the average selling price (ASP) for the chips rose by 4 percent.
In NAND flashes, which are widely used in almost all Web-connected devices, SK hynix saw a negligible 1 percent drop in shipments from the previous quarter.
SK hynix expects to boost its bottom line throughout this year as it is better positioned to lift corporate growth due to high industry concentration, increasing barriers to entry, escalating technological uncertainty and reduced demand elasticity.
Park of SK hynix said it plans to strengthen its market competitiveness by focusing on mobile products such as mobile DRAM and eMMC. It will also embark on a tech migration to 20- nanometer for all its DRAM products and 10-nanometer for NAND flash products in the second half of this year.
In investment, the company maintains a conservative stance by confirming that it has no plans to build new DRAM and NAND chip-producing lines. Rather, it plans to put more focus on saving costs, she stressed.
``As we see a technological limit below the 10-nanometer level, next-generation memory chips such as PRAM, Re-RAM and STT-MRAM will be coming onto markets in the next two and three years,’’ said the company in a conference call to analysts.
``Because memory chipmakers have no plan to build new lines, the current tight supply situation will continue,’’ the company said, adding the trend will boost profits of the chipmaker for the remainder of this year.
LG hit by rising marketing costs
LG Electronics, another major technology company in Korea, showed robust growth in smartphone sales during the first three months of this year. But its profits fell on a year-on-year basis due to reduced prices and increased marketing costs.
Its net profit reached 22 billion won in the January-March period, compared with a profit of 248 billion won a year earlier. Revenue slipped 6.8 percent on-year to 14.1 trillion won over the cited period, while operating profit declined 13 percent to 349 billion won in the cited period.
From the previous quarter, however, LG Electronics returned to the black. Its first-quarter operating income nearly doubled from the previous quarter, but sales slipped 4.7 percent on-quarter in the January-March period.
The consumer electronics affiliate of LG Group broke ``10 million units’’ in smartphone sales per quarter thanks to good sales of its Optimus line of devices, spokeswoman Claire Jang said. Smartphones accounted for 64 percent of total mobile phone sales by LG, which was a record.
By divisions, its home entertainment business, which handles the television business, reported 5.17 trillion won revenue from 29.8 billion operating profit, followed by its handset unit with 3.2 trillion won revenue and 132 billion won operating profit.
The home appliances division earned 2.8 trillion won revenue, up from 11 percent year-on-year, as it impressed consumers in the Middle East and South America.
"We will try hard to continue the uprising business momentum in the second quarter, although fiercer rivalry with competitors from OLED TVs to smartphones is expected,’’ the spokeswoman said.