Expansion of Chip Market
With semiconductors taking the lead in upholding the performances of the Korean electronics such as Samsung Electronics, expectations are strengthening that SK Hynix will also perform better than the market expected.
It is forecast that SK Hynix will recover to one trillion won (US$900 million) level in quarterly operating income after the fourth quarter as demand for semiconductors has been rapidly growing since August.
According to the semiconductor industry on October 9, Samsung Electronics’ Semiconductor Division reportedly posted in operating income the middle of 3 trillion won level (US$2.7 billion) close to 3.66 trillion won (US$3.29 billion), the highest-ever quarterly operating income, in the third quarter of last year. This figure is an increase of over 1 trillion won (US$900 million) from 2.64 trillion won (US$2.37 billion) in the previous quarter.
Thus, Samsung Electronics posted 7.8 trillion won (US$7.0 billion, estimated) in operating income. This figure is up about 300 billion won (US$270 million) from about 7.5 trillion won (US$6.7 billion) that the securities industry expected. This means that semiconductors virtually recouped the cost of a recall of the Galaxy Note 7 due to its problematic batteries that burst into flames. The securities industry estimates the cost at 1 to 1.5 trillion won (US$0.9 to 1.3 billion). The operating income was driven up mainly by an increase in demand for memory semiconductors for PCs which had been in a slump and non-smartphone semiconductors such as semiconductors for servers and automobiles thanks to the expansion of the IoT market.
According to data released by the US Semiconductor Industry Association (SIA) on October 3, the world semiconductor market expanded 3.5% from the previous month by recording US$280 billion in August. This was a three-year monthly high, the SIA explained.
An increase in semiconductor demand prompted semiconductor prices to rise on a full scale. According to DRAM Exchange, a market survey firm, at the end of September, the average price of DRAMs (DDR3 4Gb) stood at US$1.5, an increase of 20% from US$1.25 on June 30.
It is expected that rebounds of semiconductor demand and prices will enable SK Hynix to come up with an earnings surprise in the third quarter. It is prudently expected that SK Hynix will recover to 1 trillion won (US$900 million) in operating income in the fourth quarter. “Prices of DRAMs for PCs are expected to soar in the fourth quarter. This will set off a spike in prices of servers and mobile DRAMs,” said Lee Seung-woo, an analyst at IBK Investment Securities. “I raise SK Hynix’s operating income in the third and fourth quarters to 690 billion won (US$620 million) and 1 trillion won (US$900 million), respectively and its operating profit of next year 34% to 4 trillion won (US$3.6 billion).”
If SK Hynix recovers to the one trillion won (US$900 million) level in quarterly operating income, it will be in one year and three months since the third quarter of last year. SK Hynix posted more than 1 trillion won (US$900 million) in operating income for seven quarters in a row until the third quarter of 2015. But a drop in prices of memory semiconductors lowered its operating income to 988.9 billion won (US$890.0 million) in the fourth quarter. In the first and second quarters of this year, the figure continued to slip to 561.8 billion won (US$505.6 million) and 452.9 billion won (US$407.6 million) in the first and second quarter of this year, respectively.