SK hynix's operating profit up, Naver down in Q3

By Baek Byung-yeul

Korean chipmaker SK hynix reported Thursday it had made a record profit in the third quarter powered by robust demand for DRAM and NAND chips.

But Naver, the largest portal operator here, saw its operating profit decline for the fourth straight quarter because of losses from its mobile messaging affiliate Line and increased investment expenditures.

SK hynix said in its earnings report that it had an operating profit of 6.47 trillion won in the July-September period, a 73 percent increase year-on-year. It recorded sales of 11.42 trillion won and net income of 4.69 trillion won.

The firm said its DRAM shipment increased five percent from a quarter earlier thanks to the strong seasonal demand for mobile while demand for DRAM chips for server products stayed strong. The average selling price of DRAM chips rose by 1 percent.

While the average selling price of NAND flash chips dropped 10 percent quarter-on-quarter, the shipments of NAND flash chips increased 19 percent as more smartphones have increased their storage capacity.

Predicting its future performance, SK hynix said the DRAM market may be hit by market uncertainties due to rising global trade tensions.

In response to a possible slowdown around the DRAM market, SK hynix said it will respond actively to market changes through the development of new memory manufacturing processes and stable operation of its production facilities.

The firm said it will complete the development of the second-generation 10 nanometer-class DRAM within this year. Also, it will finalize expansion of its cleanroom space at its Wuxi plant in China by the end of this year to begin mass production starting the first half of next year.

For the NAND flash chip market, the firm said it will expand its position in the mobile and corporate SSD market with fourth-generation 3D NAND chips.

Moody's said SK hynix is heavily reliant on the DRAM sector for profit generation, but predicted it will maintain its solid position as the world's second-largest DRAM supplier as there has been strong demand for both DRAM and NAND chips.

The rating agency upgraded the chipmaker's rating to Baa2 from Baa3 on Oct. 23. “The upgrade reflects SK hynix's improving business profile, as well as our expectation that SK hynix will maintain robust profitability and strong financial metrics through the industry cycles,” Moody's analyst Sean Hwang said.

While SK hynix enjoyed a better-than-expected earnings report, Naver's operating profit decreased 29 percent year-on-year.

In its earnings report, the internet firm posted sales of 1.39 trillion won in the third quarter, up 16.4 percent year-on-year, but its operating profit came to 221.7 billion won, down 29 percent from a year earlier and down 11.5 percent from a quarter earlier. Net profit also plunged 68.3 percent year-on-year to 68.4 billion won.

Naver explained the worsened operating profit came mainly from increased investment expenditure to its Japan-based mobile messaging unit Line.

In the third quarter, Naver invested 578.6 billion won in Line and other platforms, which is up 50.2 percent year-on-year. The firm recorded an operating loss of 54.6 billion won in its Line and other business sector. Naver owns a 73 percent share of Line.

Park Sang-jin, chief financial officer of Naver, said his company will keep increasing its investment in Line. “Naver is Line's largest shareholder and global business partner,” Park said during a conference call. “In the medium and long term, it is inevitable to increase investment in Line.”

Line has been expanding its business portfolio. It recently announced an investment plan of 247.6 billion won into its subsidiary Line Financial to reach into the financial business.