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October 26, 2006 10:00 am

Hynix says Q3 profits fall 25%

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Hynix Semiconductor, the world’s second largest computer memory chip maker, on Thursday reported a larger-than-expected 25 per cent fall in net profits during the third quarter, as its profitability was dented by the launch of a $2bn factory in China.

However, the South Korean chipmaker presented an upbeat outlook for its Nand flash memory chips, used in MP3 players and digital cameras, and dynamic random access memory (D-ram) chips used mostly in personal computers.

Hynix reported net profits of Won384bn ($401m) in the third quarter, down from Won512bn in the previous year and well below the consensus forecast of analysts surveyed by Reuters of Won428bn. Hynix shares closed 0.57 per cent higher at Won35,550 on Thursday.

The company said strong demand for its core products meant its bottom line had improved compared with the previous three months.

“During the third quarter, a favourable market condition continued for D-ram,” it said in a statement. “Demand was especially strong from PCs as more [Microsoft] Vista-ready PCs are sold, while supply was tight, due to technology migration issues at some suppliers.”

Meanwhile, the Nand flash market showed signs of improvement with the launch of new MP3 players and increasing densities for flash cards and USB drives, it said.

Amid increasing competition in the Nand flash market, Hynix increased production of Nand flash chips used in devices such as the Apple iPod by almost 50 per cent during the third quarter, as the average price of its memory chips slid by 24 per cent.

Forecasting a further 10 per cent price fall in the current quarter, Hynix said it would try to offset this by increasing production by as much as 25 per cent before the end of the year.

It also said it would spend Won717bn to expand production lines and prepare for increased demand for memory chips.

Samsung Electronics, the world’s largest memory chipmaker, last week said it invest an additional Won1,000bn to increase capacity of its semiconductor business to meet growing demand for memory chips, which helped provide the company with better-than-expected 16 per cent rise in third-quarter profit.

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