Sat, Oct 20, 2001 page21

• Hynix posts huge 3Q loss

  MEMORY PROBLEMS The South Korean chipmaker suffered an even worse loss than expected, which will make it harder to arrange a second bailout in four months

  • BLOOMBERG
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  Hynix Semiconductor Inc had a bigger-than-expected 1.6 trillion won (US$1.3 billion) third-quarter loss, which may make it harder for the third-largest computer memory chipmaker to stay in business.

  Hynix is asking creditors for a US$5.4 billion bailout, its second rescue in four months, as losses mount from selling chips at below their cost of production.

  

  An employee of Hynix Semiconductor Inc works in one of the troubled company's clean rooms in South Korea.

  PHOTO: BLOOMBERG

  "I cannot say one way or other how [the bailout] will go," Hynix Chief Executive Officer Park Chong-sup said on a conference call with analysts and reporters to discuss the earnings announced earlier yesterday. Park said he expects creditors to decide before the end of next month.

  Korea Exchange Bank, Hanvit Bank and other banks are wary of lending more money to Hynix as the slump in demand for semiconductors, which provide the main memory for personal computers, continues. The company is asking for a loan of as much as 1 trillion won as part of the more than 7 trillion won bailout.

  The bailout "won't be enough to save this company unless there is a substantial rebound in chip prices," said Chung Doo-sun, who manages 400 billion won at CJ Investment Trust Management Co in Seoul. "The best thing to do now is to sell [Hynix] in parts and cut any losses still possible."

  Worldwide sales of dynamic random access memory chips may fall 67 percent by value this year as the global economy slows and consumer confidence was hurt by last month's terrorist attacks, said Dataquest Inc, a research firm. The spot market price for DRAM chips has fallen 78 percent this year.

  The company had an operating loss of 531 billion won in the three-month period. Sales fell to 552 billion won from 2.4 trillion won in the third quarter last year, Hynix spokesman Kim Seung-soo said.

  The company lost 2.1 trillion won in the first-half and last made a profit, of 66 billion won, in the third quarter of last year. It has posted a full-year profit once in the last four years.

  A survey of 22 analysts by IBES International forecast the company will make a loss of 2.8 trillion won this year, implying third-quarter losses of 350 billion won, based on previous quarterly results.

  "These numbers underline the depths to which the market has sunk," Jonathan Dutton, an analyst at UBS Warburg in Seoul, who forecast the company needs US$2 billion of new money over the next 15 months to survive. "It will make banks question how much money they have to pump into the company to keep it afloat."

  Bank profits are already suffering the consequences of lending to the former unit of the Hyundai Group. Yesterday, Kookmin Bank, Korea's biggest lender, said profit fell a third from a year earlier as it set aside more funds in case the chipmaker fails to repay its US$6.6 billion debt.

  "We will probably have to raise our provisions for loans to Hynix," said Chang Bong-ki, a credit officer at Chohung Bank, which is owed 732 billion won by Hynix. "This means a readjustment of our 402.3 earnings target for the second half of this year is inevitable."

  Hynix shares rose as much as 10.5 percent to 1050 won after Park told investors in a later conference call the company may raise as much as 1 trillion won from selling semiconductor production facilities.

  Park earlier told analysts Hynix may sell older, less profitable production lines and that it had received expressions of interest from two groups of investors, one from China and another in Korea.

  Still, the pain is likely to continue as the spot price of the chip used as a benchmark by investors, the 64-megabit P133, fell to US$0.59 yesterday and has been trading since May at less than the US$1.50 level that analysts estimate chips cost to build.

  The chipmaker asked creditors for up to 1 trillion won of new loans for money it needs to spend on new equipment and sustain money-losing operations, Park said.

  Without the new cash the company won't be able to invest in new facilities to keep up with competitors, Park said. Hynix wants to spend 451 billion won on new equipment in the fourth quarter to upgrade its facilities.

  Samsung Electronics Co, the largest maker of the chips which provide the short-term memory for computers, plans to spend 3.9 trillion won this year.
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