SK Hynix posts record third-quarter profit

SEOUL (Reuters) - South Korea’s SK Hynix Inc said on Thursday third-quarter operating profit leapt more than five-fold to a record, matching market expectations, on rocketing demand for memory chips for servers and smartphones.

The world’s second-biggest memory chip maker behind Samsung Electronics Co Ltd made a bigger profit in the quarter than it did in all of last year, as a “super-cycle” of tight supply and soaring demand drives chip margins.

For the current quarter, SK Hynix expected shipment growth in both DRAM and NAND, as data centres demand more server DRAMs, and year-end smartphone demand drives up mobile NAND sales.

DRAM shipments

Next year, SK Hynix said industry-wide DRAM shipments could grow by around 20%, while NAND shipments could grow by mid-30%.

“DRAM supply will not suddenly increase, and investments on artificial intelligence and big data aren’t likely to decrease any time soon,” said Lee Seung-woo, analyst at Eugene Investment & Securities.

All DRAM product prices have risen for three consecutive quarters, SK Hynix said.

Q3 earnings

Profit for July-September rose to 3.7tn won ($3.28bn) from 726bn won a year ago, SK Hynix said, compared with a 3.8tn won Thomson Reuters StarMine SmartEstimate with 20 analysts surveyed. Revenue rose 91% to 8.1tn won.

SK Hynix is on track for what analysts estimate to be its largest-ever annual operating profit of 13.6tn won. Samsung is also expected to book record quarterly profit for the three months through September on 31 October.

Total industry revenue this year will likely be a record $126bn, and is set to rise further to $130bn in 2018 before falling to about $115bn in 2019, forecasts from research provider Gartner showed.

While DRAM supply is expected to remain tight as new production will not be ready until 2019, NAND flash supply-demand will balance in 2018, data provider DRAMeXchange said.

Hynix agreed last month to invest 395bn yen in Toshiba: Wikimedia Commons

Toshiba

SK Hynix agreed last month to invest 395bn yen with a consortium led by Bain Capital buying Toshiba’s memory chip business, but analysts said the benefits for the South Korean chipmaker were unclear.

“Unlike strategic investors such as Western Digital, SK Hynix is not expected to utilize Toshiba’s factories for NAND contract manufacturing, while the situation does not makes joint technological development easy,” Samsung Securities analyst MS Hwang said in a note last week.

To address anti-trust concerns, Toshiba said SK Hynix would be barred from accessing proprietary information that belonged to the chip unit, and for 10 years would not be permitted to own more than 15% of voting rights.

SK Hynix shares were down 3.6% to 78,000 won as investors booked profits, versus a 0.5% lower benchmark Kospi Composite.