Chip prices drive Hynix 4Q loss

SEOUL, South Korea - Hynix Semiconductor Inc. posted its worst quarterly performance in four years Friday due to falling chip prices in an oversaturated market.

Hynix, the world's second-largest memory chip maker by sales, said it lost 467 billion won ($496 million) in the three months ended Dec. 31, compared with 1.02 trillion won during the same period last year.

It was the company's worst quarterly net loss since the fourth quarter of 2003, and far worse than the 53.5 billion won ($56.8 million) analysts polled by Thomson Financial had expected.

"The industry will remain challenging in the first quarter of this year as weak pricing may persist," O.C. Kwon, Hynix's senior for strategic planning, said during a conference call.

Sales during the quarter at the Icheon, South Korea-based company fell 35 percent to 1.73 trillion won ($1.84 billion) from 2.66 trillion won in the last quarter of 2006.

Reflecting the gloomy industry outlook, Hynix cut its capital spending plan for this year by 25 percent to 3.6 trillion won ($3.8 billion), down from 2007's 4.8 trillion won.

For full-year 2007, net profit plunged 84 percent to 329 billion won ($348.7 million), while sales rose 11 percent to 8.43 trillion won ($8.95 billion).

Prices of memory chips — such as DRAM, or dynamic random access memory, used in personal computers and NAND flash used in MP3 players and digital cameras — have fallen steeply, leading most chip makers to post losses for the October-December quarter.

Analysts say those losses may extend through the first and second quarter of 2008, adding that profitability could improve in the second half on stronger seasonal demand.

"In terms of both earnings and chip prices, the first quarter should be the bottom for the industry and Hynix," said C.W. Chung, a Seoul-based analyst at Lehman Brothers.

"Losses at Hynix are expected to widen in the current quarter, but will be narrowed in the second quarter and then the company will possibly return to a profit in the third quarter," Chung said.

Hynix's DRAM sales prices fell 35 percent sequentially in the fourth quarter from the third, with 7 percent on-quarter growth in shipments. NAND flash chip prices declined 34 percent, although shipments grew 47 percent on strong demand for MP3 players and mobile phones.

DRAM shipments accounted for 60 percent of total sales in the fourth quarter, down from 67 percent in the third and 75 percent in the fourth quarter of 2006.