[THE INVESTOR] Korean chipmaker SK hynix will likely see its profits decline from the fourth quarter through the first half next year due to negative market conditions, according to market analysts on Oct. 22.

The chip company, which has enjoyed robust demand and price hike of DRAM for the past couple of years, is forecast to post record profits in the July-September period. 

Operating profit of the company is expected to reach 6.3 trillion won (US$5.58 billion), up 69.1 percent on-year, while the revenue will increase 45.4 percent from the same period last year to 11.8 trillion won.

From the fourth quarter, however, things will likely become unfavorable for the affiliate of SK Group as well as tech giant Samsung Electronics, the No.1 DRAM maker in the world, analysts said. SK hynix is the second largest DRAM firm while it comes fifth in the NAND segment.

“The price of NAND and DRAM chips is expected to decrease simultaneously in the fourth quarter, which will drag down SK hynix’s operating profit to 5.9 trillion won, down by 6.4 percent from the previous quarter,” said Kim Dong-won, an analyst from KB Securities, in his recent investment report.

The quarterly operating income will remain in the 5-trillion-won range throughout the first half as the seasonal low demand and price fall will weigh down on the company’s growth, he added.

Hi Investment & Securities, one of the local stock brokerage houses that cast a negative outlook on the Korean chip company, even forecast that SK hynix’s Q1 operating profit could drop to 4.3 trillion won due to sluggish demand.

The anticipated low demand for DRAM is said to be linked to the sluggish smartphone sales globally, as smartphone makers avoid increasing their inventory.

Global DRAM powerhouses, including SK hynix, Micron and Samsung, on the other hand, are preparing to ramp up production of DRAM chips in the first half next year -- another factor that could drag down DRAM prices.

By Kim Young-won (wone0102@heraldcorp.com)