Hynix Q2 net dips on rock-bottom chip prices

(ATTN: RECASTS para 5; UPDATES final share price; ADDS executive remarks; RESTRUCTURES) By Lee Youkyung SEOUL, July 21 (Yonhap) -- Hynix Semiconductor Inc. reported a 34 percent plunge in its second-quarter earnings on Thursday as weak demand for PCs battered memory chip prices and offered a downbeat outlook for the remainder of the year. The world's second-largest maker of memory chips said in a regulatory filing that net profit reached 473 billion won (US$448.4 million) in the April-June period, compared with 718.7 billion won one year earlier. Sales fell 16 percent from one year ago to 2.76 trillion won, and operating profit declined 56 percent to 446.9 billion won. Hynix's second-quarter bottom line was higher than the market consensus of 373.8 billion won, according to analysts polled by Yonhap Infomax, the financial news arm of Yonhap News Agency. Net income came in higher than the market consensus because it included a provision against a legal dispute with Rambus Inc., after the Korean firm won a case against Rambus in May. It declined to reveal the exact amount as it could affect the on-going lawsuit. Shares of Hynix closed at 23,650 won on the Seoul bourse, down 2.27 percent from the previous session. "PC sales were worse than expected and as a result, clients managed their inventories conservatively, which led to weak chip prices," Kwon Oh-hyun, the company's chief executive officer, told investors. The tumble in second-quarter earnings was due to weak consumer spending on electronics products in the wake of the sovereign debt crisis in Europe and an economic slowdown in the United States, the company said. "The second quarter started off with solid demand amid supply concerns resulting from the Japanese earthquake," Hynix said in a statement. "However, this trend reversed in the latter part of the quarter due to weaker than expected demand." Hynix competes with bigger rival Samsung Electronics Co. in the dynamic random access memory (DRAM) chip market and with Japan-based Toshiba Corp. in the NAND flash memory market. Last month, market research firm Gartner Inc. cut its annual growth forecast for the worldwide PC market to 9.3 percent this year, compared with its previous forecast of 10.5 percent, because consumers in advanced markets are reluctant to buy new PCs. Hynix said it is also revising down its own forecast of worldwide PC shipment growth to 5 percent from 10 percent. PC makers have been facing uphill competition from new mobile computing devices, such as smartphones and tablet PCs. Chipmakers are trying to counter slow growth in computer memory chip sales by capitalizing on the booming demand for mobile chips. In response to the trend that mobile device sales are outperforming the growth of PC sales, Hynix raised its portion of non-PC DRAMs to 70 percent of its second-quarter DRAM sales, which will be maintained for the rest of the year. Hynix said the company may face rough times in coming months, and macroeconomic condictions remain as the biggest source of uncertainty. "We expect challenging market conditions ahead," a company official said in a teleconference. "We will improve cost competitiveness in the second half of this year to weather price weakness in the market." Analysts predict Hynix will post lower profits going forward as demand for tablet PCs, which need smaller memory capacities than personal computers, are quickly replacing demand for laptop computers. Apple Inc.'s dominance in the tablet PC market is also capping mobile DRAM demand from rival tablet PC makers, they said, because they are delaying new tablet PC launches. "(Hynix's) third-quarter operating profit is forecast to fall from the second quarter. DRAM prices will likely worsen, and mobile DRAM prices are also expected to decline," said Noh Geun-chang, an analyst at HMC Investment Securities Co. Growth of tablet PC sales is falling short of expectations as the dominance of the iPad 2 prompted rivals to postpone new product launches. Hynix said it cut its forecast of the tablet PC market by about 40 percent, as the lack of competition in the market is reducing overall demand. The chip giant said it plans to follow the technology migration to help reduce costs and guard its bottom line. Creditors of Hynix put up a major stake in the chipmaker for another round of sales after several attempts to find the company an owner failed. SK Telecom Co., the country's leading mobile carrier, and shipbuilding conglomerate STX Group submitted preliminary bids.