Hynix Reports Large Quarter Loss as Chip Prices Dive

Hynix Semiconductor, the world's No. 2 computer memory chip maker, logged its fifth straight quarterly loss on Thursday as chip prices plunged and output shrank amid the industry's worst downturn.

After suffering a lengthy slump that pummeled chip prices below costs and given the bleak outlook for consumer demand, memory chip makers are now pinning hopes on the sector's consolidation to ease oversupply and enable a return to profits.

Although demand remains sluggish, spot prices of dynamic random access memory (DRAM) chips, used mainly in personal computers, have recovered since mid-December as makers slash output and investment in capacity.

Hynix said DRAM prices declined 43 percent in the fourth quarter from the third, while NAND flash prices dropped 18 percent over the same period.

Hynix, which trails sector leader Samsung Electronics, posted a 1.33 trillion won ($964.8 million) net loss in the October-December quarter on a consolidated basis, worse than a 1.22 trillion won loss forecast by Reuters Estimates.

The result compares with consolidated net losses of 462 billion won a year earlier and 1.67 trillion won in the third quarter.

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Consolidated quarterly sales were 1.51 trillion won, compared with 1.85 trillion won a year earlier and a consensus forecast of 1.57 trillion won.

Analysts expect Hynix to return to profit only in late 2009, but predicted the annual shortfall for 2009 would narrow from 2008 after the South Korean company shut down older, less efficient production lines to control losses.

Expectations for consolidation in the battered memory chip industry are growing as German chip maker Qimonda filed for insolvency late January and Taiwanese chip makers are discussing a possible merger or restructuring.

As many players were forced to seek outside help due to cash shortages, Hynix also secured a funding lifeline in January, raising 324 billion won in a new share issue and 500 billion in loans from its shareholder banks.

Hit by the dismal chip market, shares of Hynix dropped 65.4 percent in the fourth quarter amid the wider market's 22.4 percent fall.

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