BL/Hynix May Cut Spending by 1 Trillion Won in 2nd Half (Update1)
By Kevin Cho
April 20 (Bloomberg) -- Hynix Semiconductor Inc., the world's second-largest maker of memory chips, is considering cutting spending in the second half of this year by as much as 1 trillion won ($1 billion) because of lower prices.
``We expect a recovery in the second half,'' Kim Jong Kap, chief executive officer of Ichon, South Korea-based Hynix, told reporters on April 18 in comments embargoed until today. ``We're thinking about reducing capital expenditure by about 1 trillion won, but the actual amount will be decided in the second half.''
Lower chip prices have forced smaller rivals including Qimonda AG and Nanya Technology Corp. to reduce spending plans for 2008 after they reported record losses in the three months ended Dec. 31. Elpida Memory Inc., Japan's largest maker of computer memory chips, on April 18 reported a full-year loss that exceeded analysts' estimates.
``It appears Hynix won't be able to invest much at all in the second half, and it's the same story for other chipmakers,'' said Lee Seung Woo, a semiconductor-industry analyst at Shinyoung Securities Co. in Seoul ``This is just what the industry needs because overinvestment at this point will only delay a recovery.'' He has a ``neutral'' rating on Hynix shares.
Prices of the benchmark dynamic random access memory chip have remained at near record lows this year after slumping 85 percent in 2007 because of a glut. Capital investment by global computer-memory chipmakers is expected to decline 33 percent this year, Credit Suisse Group said last month.
Hynix said in February it planned to spend 3.6 trillion won in 2008, of which 2 trillion won would be used in the first half.
Matching the Industry
Chip prices are unlikely to decline further in the second quarter and demand is expected to rise, according to Kim. Prices will probably increase in the third quarter, Kim said, citing estimates by researchers including iSuppli Corp. and Gartner Inc.
Hynix will try to raise chip prices to customers in the second half of April, Kim said, after the company increased prices in the first half of the month.
``Even with the investment cut, we expect our shipment growth to match that of the industry this year,'' Kim said. Hynix is predicting growth of its DRAM shipments, measured in terms of storage capacity known as bits, to be from 55 percent to 60 percent in 2008.
Hynix plans to focus on profitability and financial soundness this year as the company seeks to increase sales of chips used in mobile phones, which have a premium of as much as three and a half times computer memory chips, Kim said.
Revenue from so-called mobile DRAM chips is expected to account for 10 percent of 2008 sales, compared with 3 percent last year, according to Kim.
To contact the reporter on this story: Kevin Cho in Seoul at kcho2@bloomberg.net
Last Updated: April 20, 2008 00:49 EDT
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