SK hynix enjoys record sales, profits

Chipmaker vows profitability, more investment

By Kim Yoo-chul

SK hynix, the semiconductor affiliate of SK Group, enjoyed an outstanding performance in 2013 with record sales and profits despite the prolonged economic downturn.

The world’s second-biggest memory chipmaker said in a filing to the Korea Exchange Tuesday that its revenue jumped by 39.4 percent to a record high of 14.16 trillion won for 2013.

The firm made a net profit of 2.8 trillion won and an operating profit of 3.3 trillion won.

“It’s amazing to see that SK hynix’s operating and net profit margins were 24 and 20 percent, respectively. But what’s more important is that the chipmaker is aiming to do better this year. There are no big risk factors. SK hynix is in the process of re-rating,” said Kim Il-tae, chief investment officer at MIDO Investment, by telephone.

The company itself also remains upbeat over its prospects.

“Supply and demand will balance out this year. Leading chip suppliers aren’t aggressive in investment in facilities. Also, technology migration toward thinner ones is helping the sector limit the growth in supply,” said Kim Joon-ho, the head of its corporate center, in a conference call to investors and analysts on its fourth-quarter earnings.

SK hynix is the solid No. 2 player in DRAM memory chips, which are used in every electronic device, narrowing in on Samsung in terms of profit margins and technology. NAND flash memories aren’t as strong with relatively weak controller technology as seen in the lower multiple assigned.

Kim said that it will mass-produce NAND chips by using a finer 16-nanometer processing technology, while the chipmaker is also putting more resources into controllers in a bid to expand its NAND chip-embedded product lines.

“For advanced three-dimensional (3D) NAND chips, we are ready to meet demand from customers,” Kim said.

Sustainable growth

The company will place top priority on ensuring sustainable growth by putting emphasis on two key areas ― increasing profitability and expanding investments.

“Last year, we spent 3.5 trillion won. This year, SK hynix plans to spend as much as 4 trillion won. The increased portion will be used for building clean rooms at our new line in Korea,” Kim said.

Park Rae-hak, an executive at the chipmaker, separately said it will seek quality growth and stressed that market conditions are favorable to the company.

“We expect growth in DRAMs and NANDs to remain at mid-20 percent and go slightly over 40 percent this year. SK hynix will match up with the expectations. Chip prices aren’t as bad as we had earlier expected.

“As smartphones are being saturated, demand for mobile DRAM chips will decrease compared to last year. But replacements of corporate PCs after Microsoft’s decision to end the support of its Windows XP computing platform will lift the demand for PCs,” said Park.

Increasing shipments of high-end applications and solid-state drives (SSD), the next-generation storage that is gradually replacing hard disk drives, are going to push SK hynix to keep its head up.

“SK hynix will reap rewards especially as we move to this next leg of DRAM structural recovery. The firm is in good shape as it is catching up potential in NAND to be realized once the company begins V-NAND shipments in the first half of this year and continues to improve controller competitiveness over time,” Bernstein Research said.

For technologies, Park of SK hynix said it will try to release high bandwidth memory (HBM) chips as planned to maintain its competitive edge as a global memory chip leader.

As The Korea Times earlier reported, SK hynix said its factory in Wuxi, China, has fully recovered since November 2013. “The factory has been normalized in terms of output,” said Kim.