SK Hynix posts record annual profit on solid chip demand

SEOUL — South Korea’s SK Hynix, Inc. said on Thursday that fourth-quarter operating profit nearly tripled to a record high, exceeding market expectations, as demand for its memory chips held firm despite a stronger won.

The result boosts the world’s second- biggest memory chipmaker after Samsung Electronics Co. Ltd. to its largest- ever annual operating profit of 13.7 trillion won ($12.9 billion), driven by fatter margins for memory chips as servers and mobile devices seek more firepower.

Falling prices for NAND flash memory chips, used in products like USB drives and mobile phones, and concerns that the memory chip boom might be ending soon have sent SK Hynix shares down about 20% from a 16-year high of 90,300 won in early November.

However, many analysts are expecting SK Hynix to make bigger profits in 2018 as NAND shipments are seen increasing, and demand also seems strong for DRAM chips used in mobile phones, computers and servers for temporary data storage.

“Despite the strengthening of the won versus the dollar, DRAM prices continue to be strong and appetite from servers could improve further, fueling an outlook of another record- breaking profit this year,” said Pak Yu-ak, analyst at Kiwoom Securities.

The stronger won makes Korean products less competitive overseas and erodes foreign income when repatriated.

SK Hynix forecast that a limited supply increase and strong demand for their use in servers will keep DRAM chip demand buoyant this year.

The firm said a supply shortage for NAND flash chips will likely ease gradually in 2018, as producers increase their highcapacity NAND supply. Uncertainty remains for some firms which are trying to move from a two-dimensional to the more complex three-dimensional chip.

Total memory chip industry revenue in 2017 was a record $132 billion, up from $80 billion in 2016, and is set to rise further to $ 150 billion in 2018 before falling to about $130 billion in 2019, data from research provider Gartner showed.

Operating profit for its October-December quarter rose to 4.5 trillion won from 1.54 trillion won in the same period a year ago, SK Hynix said. That compared with a 4.3 trillion won Thomson Reuters StarMine SmartEstimate from a survey of 12 analysts.

Revenue rose 69% to 9 trillion won.

Larger rival Samsung is also expected to book record quarterly profit for the OctoberDecember quarter, although its guidance earlier this month fell short of market consensus partly due to the strong won.

South Korean exporters will be keeping a close eye on the won in 2018. The currency traded on Wednesday near a three-year high. SK Hynix said DRAM chip shipments rose 3% from July- September while average selling prices climbed 9%. NAND chip shipments jumped 16% while the average selling price rose 4%. —