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Hynix Quarter Results Hurt by DRAM Freefall, Outlook Grim

Hynix Semiconductor, the world's No. 2 memory chipmaker, posted on Thursday a bigger-than-expected 56 percent fall in quarterly net profit as memory chip prices underperformed amid severe oversupply.

The outlook for memory chipmakers such as Hynix and bigger rival Samsung Electronics remains bleak until late next year as the production glut is likely to continue.

South Korea-based Hynix earned 168 billion won (US$183 million) in the quarter to Sept. 30, compared to 383.8 billion won a year ago and well short of a 343 billion won profit forecast by 12 analysts polled by Reuters Estimates.

The figure is a disappointing result as investors had been expecting a stronger second-half market for dynamic random access memory (DRAM) chips, the company's bread-and-butter product.

Operating profit was 263 billion won on a parent basis, worse than the 339 billion won forecast.

Sales totaled 2.34 trillion won, against expectations of 2.43 trillion won and last year's 1.82 trillion.

Hynix said average prices of DRAM chips rose 3 percent in the third quarter, after falling 43 percent in the previous period, while shipments rose 17 percent.

Hynix also said average prices of NAND flash chips, popular in portable electronic gadgets, fell 6 percent.

After the first and second quarters were marked by overproduction and steep price declines, makers of dynamic random access memory (DRAM) chips had hoped for a strong rebound in the third quarter on seasonal demand heading into the year-end holidays.

But after a brief upswing in early summer, DRAM prices have been falling again, and analysts are divided on when the market will recover.

Hynix shares, valued at around 12 trillion won, was lower in the morning session, against the broader market's 0.6 percent rise.

Samsung, the world's largest memory chip maker, posted disappointing results last week and even predicted most DRAM manufacturers would post losses for the current quarter.

Reflecting investor concerns over DRAM profitability, the stock fell 6 percent in the third quarter, in sharp contrast to the KOSPI's 11.6 percent rise.

Hynix is expected to post a full-year net profit of 1.49 trillion won, according to Reuters Estimates, 26 percent less than the 2.01 trillion won profit it posted for 2006.