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Hynix Posts Steep Quarter Loss on Weak Chips, Writeoff

Hynix Semiconductor, the world's No. 2 memory chipmaker, reported its third straight quarterly net loss on Thursday as weak chip prices and a plant closure maimed its bottom line.

But shares in Hynix, valued at about $10 billion, rose over 2 percent against the wider market's 1.3 percent gain, as its operating loss came in smaller than expected.

Hynix is facing a bleak second half as sluggish demand and weak prices for dynamic random access memory (DRAM) chips, used mainly for personal computers, are set to persist amid the ongoing global slowdown. Many analysts predict the slump could drag on into early 2009.

"Hynix should turn to an operating profit in the third and fourth quarter, but it would be difficult to expect a sharp growth in earnings momentum," said Park Hyun, an analyst at Prudential Investment and Securities.

Larger home rival Samsung Electronics last week posted a lower-than-expected quarterly net profit, also due to the weak memory chip market.

Hynix posted a 707.8 billion won ($697.5 million) net loss for the quarter to June 30, compared with a revised 213.5 billion won profit booked a year ago.

The result widely missed a 225 billion won loss forecast by 12 analysts polled by Reuters Estimates as Hynix factored in the costs of closing its unprofitable Eugene, Oregon chip plant. It also reflected the burden of servicing foreign currency debt as the won's value against the dollar at the end of the second quarter was 12 percent lower than a year earlier.

The April-June loss came on the heels of the first quarter's 675 billion won shortfall.

The company's operating loss on parent basis was 183 billion won, much smaller than the first quarter's 505 billion won and less than a consensus forecast for a 235 billion won loss.

Makers of DRAM chips are mired in an 18-month-old market slump in which some key product prices have fallen more than 90 percent. While the average contract price of DRAM chips has risen by about 30 percent since the beginning of the year, the scale of earlier price drops have made a financial recovery difficult.

Analysts still expect the DRAM market, known for its strong cyclical nature, to eventually recover thanks to spending cutbacks.

Hynix said average prices of DRAM chips rose 9 percent in the second quarter after falling 16 percent in the first quarter, while shipments rose 12 percent, against a 5 percent rise in the previous period.

Average prices of NAND chips, used in cameras and other portable devices, rose 3 percent after dropping 39 percent in the first quarter. Shipments fell 15 percent, against a 9 percent growth in the previous quarter.

Shares in Hynix fell 10 percent in the second quarter against the KOSPI's 1.7 percent drop.

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