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Last updated: January 25, 2006 4:21 pm

Flash memory chips help Hynix quadruple profit

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Net profit at South Korea’s Hynix Semiconductor more than quadrupled in the fourth quarter as strong demand for Nand flash memory chips, used in MP3 players and digital cameras, offset weaker prices of D-Ram computer chips.

The world’s second largest memory chipmaker on Wednesday reported a Won751bn ($773m) net profit for the October-December period, compared with Won186bn a year earlier, as revenue rose 30 per cent to Won1,740bn. Full-year net profit rose 7.4 per cent to Won1,817bn.

Hynix has become one of the most cost-efficient chipmakers, in spite of several years of under-investment because of financial problems. It was bailed out by creditors in 2002 and completed a debt-restructuring programme last year.

Noting the deterioration in its competitors’ results over the same period, the company said it had recorded a “relatively high operating profit margin of 30 per cent, thanks to our competitive cost structure and the successful expansion of our Nand flash business”.

Hynix’s results contrasted with those of Elpida Memory, the Japanese chipmaker whose quarterly profit fell by 95 per cent and Germany’s Infineon Technologies, which reported a €122m ($150m) loss before interest and tax for the quarter.

The Korean chipmaker said that it planned to raise its capital spending this year to Won3,600bn from Won2,500bn in 2005, dispelling investor concerns about under-investment. Hynix’s bigger rival, Samsung Electronics, plans to invest Won5,630bn in its semiconductor business this year.

Hynix’s better-than-expected results were backed by a 53 per cent quarter-on-quarter rise in shipments of Nand chips, which helped counter an 18 per cent D-Ram price fall. Hynix is the third-largest Nand chipmaker with a 13.2 per cent market share, trailing Samsung and Japan’s Toshiba. Hynix and Samsung have been shifting capacity away from D-Ram towards Nand.

Analysts expect Hynix’s earnings to rise further this year, as the flash memory market grows, while D-Ram prices are likely to recover. Global sales of Nand chips are expected to rise 28 per cent to $13bn this year, according to World Semiconductor Trade Statistics.

“The Nand market will continue to enjoy a boom in the first half, although the growth rate may slow, while the D-Ram market is likely to recover in the second half on reduced supply, with more aggressive transition of D-Ram fabs to Nand production,” said Kim Young-joon, an analyst at Daishin Securities.

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