(iTers News) – Declaring a sorry end to the 8 consecutive months of profitability, Hynix Semiconductor Inc. came to fall a victim to the memory chip industry’s notoriously volatile business cycle.
With no end in sight to freefalls in prices of DRAM and NAND flash memory chips, the world’s second largest memory chip maker swung back to loss in the third quarter of 2011 ended on Sept. 31.
Hynix racked up an operating loss of 277 billion won in the third quarter of 2011 on revenues of 2.291 trillion won, which were also down 17% quarter-on-quarter.
Marking the first loss ever in 2 years since it turned profit in the 3rd quarter of 2009, the 3rd quarter financial results are alarming signals that the chipmaker can’t afford to squeeze out profits anymore, if DRAM prices stay unchanged, or deteriorate further.
Freefalls in the prices of DRAM chips took the brunt of the blame for the 3rd quarter loss, as weak demand for DRAM chips in PC markets and supply gluts have combined to force contract price down further below US$ 0.60 for a 2Gb DDR3 DRAM chip
Fabricating most of its DRAM chip production with a 40nm design rule, Hynix had barely stayed above the waters even if contract chip prices stayed below US$1 during the past 3 quarters. Yet, average selling prices of DRAM chips further deteriorated by 29% quarter-on-quarter in the 3rd quarter, forcing the chip maker to produce DRAM chips below costs.
The 3rd quarter operating loss also reflected inventory write-downs of 132 billion won.
Net loss for the quarter was 563 billion won, reflecting net foreign currency transaction loss of 250 billion won.
Price drops of NAND flash memory chips were unstoppable, too. The average selling price of NAND flash memory chips declined 14% sequentially.
To get back to profitability, Hynix plans to ramp up production of 30nm-class DRAM chips from 20% to 40% by year-end, as the 30nm design rule will allow the company to get more chips out of silicon wafer, resulting in significant cutback on costs.
Hynix is also working hard on complete developments of 20nm class process in the fourth quarter.
Its strong push for relatively lucrative non-PC markets also helps the chip makers to get back on solid footings. The chip maker depended on non-PC markets for mobile phones and server computers for 70% of its DRAM chip shipments.