January 26, 2016 / 12:42 AM / 2 years ago

UPDATE 1-SK Hynix Q4 profit slumps, Jan-March outlook uncertain

(Updates with earnings details)

* Q4 operating profit $825 mln, in line with expectations

* Q4 profit weakest since Q4 2013

* Warns of uncertain demand entering seasonally weak Q1

By Se Young Lee

SEOUL, Jan 26 (Reuters) - South Korea’s SK Hynix Inc said fourth-quarter profit tumbled 41 percent to a two-year low on slowing semiconductor sales and warned of uncertain demand heading into the seasonally weak January-March quarter.

The firm also said it expects market conditions to remain difficult in 2016 amid weak global economic growth.

SK Hynix reported an October-December operating profit of 989 billion won ($825 million), in line with a Thomson Reuters StarMine SmartEstimate of 991 billion won derived from a survey of ten analysts.

It said DRAM chip shipments fell 1 percent in October-December from the previous quarter while the average selling price dropped 10 percent, citing slower demand from mobile devices as well as weaker computer demand.

NAND chip shipments rose 4 percent but the average selling price declined 15 percent.

“Demand conditions will be uncertain in the immediate term as the memory market enters a seasonally weak first quarter,” the chipmaker said in a statement.

Shares of the world’s No.2 maker of DRAM chips behind local rival Samsung Electronics Co Ltd have fallen around 9 percent this year, based on Monday’s closing level.

Chipmakers Intel Inc and Advanced Micro Devices warned this month of weaker demand in China for the first quarter, while memory chip maker Micron Technology Inc surprised markets with guidance for a loss for its second quarter ending March 5.

Researcher TrendForce expects global DRAM revenue will likely fall 1.4 percent this year to $42.9 billion and says there is no visible sign of a recovery in demand in the near term. Reports that Apple Inc is cutting January-March iPhone orders are adding to worries that component suppliers such as SK Hynix will face margin pressure.

SK Hynix said its 2016 shipments growth for DRAM chips will be similar to or weaker than that of the industry‘s. The firm expects growth in 2016 industry-wide DRAM chip demand to be in a low 20 percent range, while NAND chip demand is seen growing in a mid-to-high 30 percent range.

Some analysts expect SK Hynix’s earnings to recover in the second half of the year, as launches of new consumer devices are seen propping up demand. In addition, increased use of 20-nanometre technology is set to cut production costs and boost margins.

Reporting by Se Young Lee; Editing by Edwina Gibbs

Our Standards:The Thomson Reuters Trust Principles.
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