Hynix Semiconductor Inc had a bigger-than-expected 1.3 trillion won (US$976 million) loss in the second quarter. The company said demand for its computer chips won't improve in the third quarter, sending its shares down as much as 12 percent to a record low.
The third-largest maker of computer memory chips plans to cut spending on equipment by as much as 40 percent to between 600 billion and 800 billion won to pare costs, Chief Executive Park Chong Sup said on a conference call with analysts.
The loss further dents Hynix's ability to keep pace in the US$30 billion-a-year dynamic random access memory chip business, where rivals such as Samsung Electronics Co spend as much as five times more than Hynix on improving output. Unless prices recover the company may run through the proceeds of a share sale last month in which it raised US$1.25 billion and again seek extensions for its loan payments.
"This is a shocking loss," said Kim Young Joon, who manages US$383 million in assets at Samsung Investment Trust Management Co in Seoul. "This is a company investors have already given up on and that has a slim chance of surviving." The company's shares fell 175 won to 1,515 on news of the loss that Kim said was 60 percent larger than expected. Chief Executive Park told analysts the 63 percent collapse in Hynix shares since the June 15 sale was "very regrettable" and the slump in chip prices won't reverse this quarter.
Hynix found itself in a bind after years of funding long-term projects with short-term debt and after taking over rival LG Semiconductor in a government-led consolidation two years ago.
Last month, state-backed creditors organized a US$4.4 billion debt restructuring, saving Hynix from defaulting on payments on the three-quarters of its debt that came due this year.
The company, which accounts for 5 percent of Korea's exports, said sales dropped 34 percent to 1.2 trillion won in the April to June quarter from the same period a year earlier. It posted an operating loss of 266 billion won and took charges of 1.1 trillion won, including 249 billion won for interest payments and 138 billion won for chips it couldn't sell.
Hynix now has five weeks of inventory waiting to be shipped, down from the six weeks' worth it had in May, said Sang Park, the company's chief operating officer. DRAM makers, who ship millions of chips a month, try to keep inventory to about two weeks.
"The cure for Hynix lies in demand, which I'm not expecting a big up-tick in for the rest of the year," said Roland Wee, a fund manager at ING Investment Management Asia. "I think it would be difficult for any sustained price increase in DRAM."
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