April 25, 2017 / 3:00 AM / 7 months ago

SK Hynix books record profit, says DRAM shortage to continue in 2017

SEOUL (Reuters) - South Korea’s SK Hynix Inc on Tuesday booked record quarterly profit due to strong demand for high-tech memory chips, and said the DRAM supply shortage that has pushed up prices will continue throughout 2017.

FILE PHOTO: The logo of SK Hynix is seen at its headquarters in Seongnam, South Korea, April 25, 2016. REUTERS/Kim Hong-Ji/File Photo

The extent of the shortage is likely to ease toward the end of the year, stabilising prices somewhat, but demand will keep rising due in part to the continued spread of cloud computing, SK Hynix said on an earnings conference call.

The results are the industry’s first in a year when analysts expect earnings records thanks to a so-called supercycle in which demand for smaller, more sophisticated chips for servers and smartphones far outstrips production capacity. That has pushed up chip prices and widened profit margins.

Overall industry revenue this year is likely grow 32 percent to a record $104 billion, showed data from researcher IHS.

“This is a supercycle that’s never been seen before. It’ll be very easy (for SK Hynix) to exceed $5 billion in monthly revenue this year,” said analyst Hwang Min-seong at Samsung Securities.

“Since there is little additional clean room space (chip production facilities) becoming available until 2019, such a trend is seen continuing next year as well.”


The world’s second-biggest maker of all major types of memory chips, behind Samsung Electronics Co Ltd, also said it will stick to short-term capital expenditure plans for NAND chips regardless of whether rival Toshiba Corp sells its chip business.

Toshiba wants to sell most or all of the unit, the world’s second-largest NAND chip maker behind Samsung. It has narrowed bidders to SK Hynix, Western Digital Corp, Broadcom Ltd and Hon Hai Precision Industry Co Ltd (Foxconn), people familiar with the process told Reuters.

Analysts have said some suitors might be more aggressive in boosting investment and output should they acquire the business, igniting a price war and hurting profitability.

“We don’t know how the Toshiba deal will progress, and even if there is a certain outcome, we don’t expect big changes in our short-term planned NAND flash capex,” President Kim Joon-ho said on the conference call.

He did not comment on SK Hynix’s bidding status.


SK Hynix said operating profit more than quadrupled in January-March from the same period a year earlier, to 2.5 trillion won ($2.20 billion). That compared with a 2.4 trillion won Thomson Reuters StarMine SmartEstimate from a survey of 24 analysts.

Revenue rose 72 percent to a record 6.3 trillion won.

DRAM shipments fell 5 percent from October-December while the average selling price rose 24 percent. NAND shipments fell 3 percent while the average price rose 15 percent.

DRAM accounted for 74 percent of revenue whereas NAND accounted for 24 percent. Other products made up the remainder.

SK Hynix’s stock price was down 0.6 percent at 0230 GMT as investors sought to profit on shares bought in the expectation of record earnings, analysts said. The benchmark Kospi share price index was up 0.2 percent.

($1 = 1,133.8500 won)

Reporting by Joyce Lee; Editing by Christopher Cushing

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below