SK Hynix Swings to Net Profit On Higher Chip Prices

       By Min-Jeong Lee 

    SEOUL--SK Hynix Inc. swung to a net profit in the second quarter on higher chip prices driven by better-than-expected demand from smartphone makers including Apple Inc.

    The company expects chip demand for mobile devices to continue to drive growth in the coming quarters.

    "Market demand for DRAM (dynamic random access memory) used in mobile devices will exceed those used in computers for the first time next year," Park Nae-hak, head of mobile and consumer marketing at the company said during an earnings call.

    SK Hynix, the world's second-largest maker of memory chips after Samsung Electronics Co., posted a net profit of 947 billion won ($850 million), reversing from a net loss of 53 billion won a year earlier. Its operating profit surged to a record high of 1.1 trillion won for the three months ended June 30 from 5.2 billion won a year earlier.

    Revenue rose 49% to a record 3.9 trillion won.

    Apple on Tuesday surprised investors by saying it sold 31.2 million iPhones in its fiscal third quarter, topping expectations, compared with 26 million in the year earlier period. Analysts estimate Apple to have accounted for about 30% of SK Hynix's DRAM revenue for mobile products.

    Shipments of DRAM, which accounted for 73% of the company's revenue, rose 20% from the first quarter, while average selling prices rose 16%, the company said.

    NAND flash-memory chips-- those that store data in smartphones and digital cameras even when power is switched off --accounted for 24% of total revenue, with shipments rising 29% from the previous quarter. Hynix said NAND average selling prices rose 5%.

    SK Hynix, which relies heavily on Apple in selling its mobile chips, has been aiming to broaden its customer base. Samsung may decide to buy memory chips from SK Hynix in the third quarter, potentially accounting for 7% to 8% of SK Hynix's DRAM revenue, said Lee Seung-woo, an analyst with IBK Securities.

    The company, however, remains cautious over its investment plans, noting its capital spending budget remains unchanged at about 3 trillion won. In the first half, it spent 1.5 trillion won in capital expenditure.

    Profits for chip makers remain volatile as they are more vulnerable to cyclical price swings.

    "Appropriately timed investments and technology development, combined with improved market conditions for the memory (chip) market led to a quarterly record results," the South Korean company said.

    Write to Min-Jeong Lee at