Seoul, Aug 13, 2003
hynix Semiconductor Inc. (‘hynix’ or ‘the Company’) today announced results for its second quarter of 2003, ended June 30, 2003.
The company had total revenues of 778 billion won for the quarter, an increase of 14% sequentially from 682 billion won in the first quarter. Sequential growth in sales was mainly attributable to more than 20% shipment growth of DRAMs, which was partially offset by a marginal decline of average selling price of DRAM, the Company’s major product. Sales from memory products constituted 82% (DRAM: 78%, SRAM/Flash: 4%) of the total sales and sales from System IC contributed 18%. Gross deficit and operating loss were 69 billion won and 258 billion won respectively in the second quarter, which are similar to the losses of the first quarter of 61 billion won and 241 billion won. Considering the selling price drop and increased sales volume, however, second quarter results implies substantial improvement in cost structure.
DRAM demand during the second quarter was still depressed due to the stagnated economy condition caused by Iraq war and SARS effect. Nevertheless, consolidated revenues which include revenues of hynix’s overseas sales subsidiaries recorded 845 billion won for the second quarter and operating loss of 183 billion won which was a slight improvement compared to the first quarter’s revenue of 685 billion won and the operating loss of 213 billion won.
Net loss in the second quarter was significantly reduced to 530 billion won compared to a net loss of 1,047 billion won in the previous quarter. Net non-operating expenses totaled approximately 272 billion won in the second quarter which include 320 billion won of loss on impairment of goodwill and 62 billion won of interest expense.
The Company’s goodwill, which originated from the acquisition of LG Semicon Co., Ltd., had been reevaluated to reflect stagnating DRAM market and was recognized as loss. Despite of the drop in average selling price, the Company achieved sales increase and cost structure improvement due to the sales volume increase. This is mainly attributable to the production increase achieved by ongoing technology innovation and continuing efforts on cost reduction using the Company’s unique Prime-chip (0.13um) technology. Specifically, demand for DRAMs seems to be turning to recovery phase since the introduction of Springdale chipset by Intel in last May and price of DRAMs is steadily rising since the end of June.
Countervailing duties of 44.29% which was imposed by the US Department of Commerce to hynix’s DRAMs that are manufactured in Korea and the final determination from the US International Trade Commission that the US DRAM industry had materially been injured are expected to have some influence to the determination scheduled to be finalized by EU Council no later than August. Nevertheless, the Company will minimize any impact that may occur by adopting following short-term and long-term strategies. 1) Maximize production from its US plant in Eugene, Oregon, which is non-subject to the duties, 2) Direct shipment to non-tariff areas for the customers based in tariff areas (“drop shipment”) 3) Develop emerging markets such as China, India and Eastern Europe. During the first half of 2003, the Company had succeeded to apply Prime-chip (0.13um) technology, which is the next generation of hynix’s unique Blue-chip (0.15um) technology, to most of its DRAM fabs.
The Company plans to further expand the adoption of Prime-chip technology and to migrate to finer geometries of Golden-chip (0.11um) technology in the second half for productivity enhancement. Meanwhile, the Company plans to drive profitability improvement by diversifying its product portfolio with value-added products.
Beginning in the third quarter of 2003, the Company expects real demand to show for memory and IC products mainly due to the anticipated recovery in corporate IT spendings, seasonal demand increase from back-to school demand, and steady increase in memory per system.
