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Hynix profit up on flash chips, tax break
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Story last modified Wed Jan 25 05:52:00 PST 2006
South Korea's Hynix Semiconductor on Wednesday posted a more than fourfold rise in quarterly profit, beating expectations. The company also said it expected a steady rise in demand for its new growth engine, flash memory chips.
Robust sales of flash memory chips, used in hot-selling digital music players and cameras, and $463 million in tax-related gains, boosted fourth-quarter earnings at Hynix, the world's second-biggest memory chipmaker.
Memory chip companies are betting that booming demand for NAND flash chips will underpin earnings growth in 2006 despite slowing PC sales. As makers are shifting production capacity to more profitable NAND flash chips, the transition also eases pressure from a supply glut of dynamic random access memory (DRAM) chips, used in personal computers, analysts say.
Hynix, which competes with bigger rival Samsung Electronics and third-ranked Micron Technology in the memory chip market, expected the market conditions for the computer memory chips to be stable this year due to a limited supply growth.
It forecasts the global DRAM market to grow 45 to 50 percent in volume this year, while expecting 170 to 200 percent volume growth for NAND flash chips.
The forecasts comes as U.S. research firm iSuppli on Wednesday upgraded its rating for near-term DRAM market conditions to "neutral" from "negative," citing reduced supply.
Hynix reported a 751.0 billion won ($769.9 million) net profit in the quarter to Dec. 31, beating the average forecast of 467.4 billion won ($479.1 million) from Reuters Estimates and against a 186.1 billion won profit a year earlier.
"The results were really good, and the outlook for Hynix is quite bullish," said Lee Seung-mun, a fund manager at Midas Asset Management. "Sales of flash-memory chips were very good and that will continue this year."
NAND flash chips accounted for 40 percent of the firm's sales in the fourth quarter, up from 30 percent in the previous quarter.
Hynix said it booked 452 billion won ($463.3 million) in gains in the fourth quarter related to anticipated tax cut.
Its stellar earnings contrasted with Japanese chipmaker Elpida Memory, which posted a 95 percent fall in quarterly profit on Tuesday and cut its outlook to a full-year loss.
Germany's Infineon Technologies, the world's No. 4 memory chip maker, also confirmed on Tuesday a loss before interest and tax of 122 million euros in the quarter to end-December.
Hynix said it planned to invest 3.6 trillion won ($3.6 billion) this year, with 1.3 trillion won allocated to its China plant. The total investment marks a 44 percent increase from the 2.5 trillion won spent in 2005.
Meanwhile, Hynix said it was working with Microsoft to get its graphic chips qualified as a component for the software giant's Xbox game consoles.
Hynix shares soared 53 percent in the fourth quarter, easily outstripping the wider market's 13 percent gain.
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