Hynix is optimistic about a turnaround

Hynix Semiconductor is showing signs of a turnaround. Its profitability improved with the recovery of prices of dynamic random access memory chips, and it has been hitting its former high-mark levels on the Korea Stock Exchange. Yesterday, Hynix posted its highest price since it was relisted on April 14: 12,550 won ($11). The company’s shares gained 18 percent in price in the six days since March 26. Its performance is improving rapidly. Nomura Securities forecast that Hynix’s operating profits for the first quarter would reach 302 billion won, far higher than its earlier forecast of 22 billion won. “If our performance continues like this, we may be able to show a profit for the year,” an official at Hynix said. In the third quarter of last year, Hynix had 94 billion won in operating profits; in the fourth quarter, those operating profits rose to 219 billion won. For the year, however, it was 85 billion won in the red from its operations. A rally in memory chip prices are the biggest reason for the comeback. “Due to the ongoing short supply, contract prices of DRAM in April rose by 20 percent since the beginning of the year,” said Kim Jang-ryeol of Hyundai Securities. “That contributed to the profitability of Hynix, and was a boon to its share price.” Hynix has been trying since 2002 to minimize new capital investment while maximizing the efficiency of its existing facilities. “Efficiency in production improved by 30 percent in both memory and non-memory products,” the official said. Hynix plans to invest 1.4 trillion won to upgrade its production lines for both memory and non-memory chips, develop new products and conduct research on 12-inch wafers, the silicon base for most computer chips. But the future is not completely untroubled. Dynamic memory chips account for 75 percent of the company’s revenue, leaving it vulnerable to price swings for those chips. And as computer sales volumes wax and wane, several business experts noted, those price swings can be dramatic. Some analysts were also doubtful about Hynix’s ambitious investment plans. “Hynix is staggering under 4.2 trillion won in debts, and part of its long-term debt will come due in 2006. The company may not be able to find enough money for their investments,” said Choi Seok-po, a researcher at Woori Securities. by Choi Ji-young