July 26, 2018 / 12:00 AM / in 3 months

Chipmaker SK Hynix positive on DRAM sales as second quarter profit soars

SEOUL (Reuters) - South Korean chipmaker SK Hynix Inc (000660.KS) said global demand for cloud computing should underpin DRAM chip sales for the rest of the year, as it posted record second-quarter profit on Thursday despite worries over the weak flash memory market.

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 world’s No. 2 memory chipmaker said American and Chinese internet data center providers would drive DRAM revenue in the months ahead, supporting earnings amid a broader slowdown in the chip industry following two years of strong profit growth.

“DRAM supply in the second half will not be enough to ease the supply shortage,” Myoung Young Lee, SK Hynix’s executive vice president, told an earnings conference call.

“Despite suppliers’ continued attempts to increase wafer capacity, production is not increasing fast enough due to growing complexity in tech migration.”

SK Hynix said operating profit for April-June grew 83 percent to 5.6 trillion won ($5 billion) from 3.1 trillion won a year earlier. That compared with a 5.4 trillion won Thomson Reuters StarMine SmartEstimate from a survey of 21 analysts.

Revenue rose 55 percent from a year earlier to a record 10.4 trillion won, the company said.

The DRAM business contributed 80 percent of the company’s sales during the quarter, while NAND accounted for 18 percent.

SK Hynix shares rose 2.4 percent on the result, after sliding more than 7 percent since Monday on analyst forecasts of a slowdown in DRAM sector performance.

NEW TECHNOLOGY

The advent of 3D NAND chips, which are cheaper to assemble than outgoing two-dimensional chips, has seen output grow faster than demand this year and fueled fears that a so-called super-cycle of disciplined production and soaring demand is coming to an end.

NAND flash memory chips, used for longer-term data storage, are found in mobile devices as well as memory cards, USB flash drives and solid-state drives. DRAM chips help servers, gaming PCs and cryptocurrency devices process masses of streaming data.

While SK Hynix said it expected the new NAND technology to put downward pressure on prices in the second half, analysts said this should not hurt earnings too much.

“With NAND prices falling having little impact on its balance sheet, Hynix’s performance will be solid next year,” said Eo Kyu-jin, a senior analyst at Ebest Investment Securities.

The company said it would boost NAND production by more than 30 percent in the third quarter, a move analysts said was in line with expectations.

DRAM shipments would see high-single digit percentage growth over the same period.

Reporting by Heekyong Yang and Ju-min Park; Editing by Stephen Coates

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