Published: Thursday, 22 Oct 2009 | 8:50 PM ET

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South Korea's Hynix Semiconductor, the world's No. 2 memory chip maker, faces a bright outlook as strong demand and prices boosts a sector recovery, after it reported its first net profit in eight quarters.
Samsung Electronics, the world's No. 1 player, and Hynix, have benefitted from technology advances the rest of the sector is struggling to catch up with after a two-year slump.

"The early phase of the recovery has been faster and lasted longer than expected," Song Myung-sup, an analyst at HI Investment & Securities said on Friday. "We will see many more DRAM players turning to profits in the fourth quarter.

Investors are now focusing on how long the upcycle will last, as hasty output increases and new technology adoption by chip makers could stall the recovery.

Spot prices of dynamic random access memory (DRAM) chips, used mainly in PCs, have more than doubled over the past year.

Hynix expects DRAM prices to rise further in November before stabilising in December. It also said the DRAM market would experience a shortage for overall 2010 due to limited supply growth.

Earlier this month, Samsung forecast its quarterly profit would beat market estimates, with analysts expecting the recovery to be most evident in the flagship chip business.

Japan's Elpida Memory has said it would post its first operating profit in eight quarters in July-Sept.

Hynix Chief Financial Officer Kim Min-chul said: "We do not expect competition with players who have overcome the worst recession to ease completely."

Hynix is in a sale process, with its creditors-turned-shareholders expecting a binding bid from Hyosung, a medium-sized South Korean business group.

Hynix shares inched up 0.3 percent in a broader market up 0.6 percent. The stock has nearly trebled so far this year, versus a 45 percent rise in the market index, on hopes for the sector's turnaround.
    
Results In Line

Hynix reported a 246 billion won ($207 million) net profit for July-Sept, broadly matching a 258 billion won profit forecast, as per analysts polled by Thomson Reuters.

The consolidated basis-result comes against a 1.67 trillion won net loss a year earlier and a 58 billion won shortfall in the second quarter.

Consolidated sales were 2.12 trillion won against a 2.01 trillion won forecast.

Earlier on Friday, contract chipmaker Chartered Semiconductor reported its quarterly net loss narrowed to $4.7 million from $24.4 million a year ago.

Hynix said its average selling prices of mainstay DRAM chips rose 26 percent in the third quarter from the preceding quarter when prices rose 20 percent. NAND flash memory prices climbed 4 percent in the third quarter.

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