[Exclusive] Hynix plans to invest $8 billion by 2012
05-16-2010
By Kim Yoo-chul
Staff reporter
koreatimes.co.kr
Hynix Semiconductor, the world's second-biggest manufacturer of dynamic random access memory or DRAM chips used in traditional PCs, plans to invest up to 9 trillion won ($7.94 billion) in its business by 2012, according to an internal document.
The move is expected to intensify competition among chip makers to gain a bigger slice of the post-crisis market as most players are planning to boost their investment in tandem with the global economic rebound.
According to a 24-page document, which was exclusively obtained by The Korea Times, Hynix aims to increase its sales by 20 percent to 12 trillion won by 2012 from this year's target of 10 trillion won through its investment, which it believes will boost the firm’s global market share to 25 percent.
The document, titled "Mid-Term Strategies for Financial Soundness," said that the chip industry will continue its bullish trend down the road, forecasting that more companies will join in an uphill battle to boost capital spending in line with the recovery.
The large-scale investment plan comes two months after Kwon Oh-chul, chief executive of the chipmaker, hinted at the possibility of expanding its spending from an earlier projection of 2.3 trillion won in late March.
Under the new plan, the company has earmarked 2.5 trillion won for this year, 3 trillion won for 2011 and 3.5 trillion won for 2012.
"The combined investment will make it possible to increase our global DRAM share to 25 percent and NAND-type flash memory share to 20 percent by 2012," the document said.
Hynix aims to achieve 12 trillion won in sales in 2012 with an EBITDA (earnings before interest, taxes, depreciation and amortization) of 6 trillion won ? for this year it is targeting a 10 trillion won in sales with an EBITDA of 5 trillion won.
The previous record sales figure clinched by Hynix was 8.6 trillion won in 2007, the year when the global semiconductor market remained strong.
The company also plans to improve its financial soundness by reducing debts and increasing cash reserves.
To that end, it plans to reduce its debt ratio below 20 percent by 2012, while securing 4 trillion won in cash. Currently, the firm sits on 1.5 trillion won in cash, and plans to allocate 2.5 trillion won in earnings in the coming quarters.
The document also revealed that the firm is considering stepping up efforts to enhance its contract-based "foundry" business as a long-term growth strategy to compete with Taiwan’s foundry giant TSMC.
"Foundry" is a manufacturing process, which has widely been adopted by chipmakers to save skyrocketing costs of research and development.
Hynix is now on sale. Its creditors-turned-shareholders, who rescued the company after it almost collapsed in 2001, have failed to find a buyer for their 28 percent stake earlier this year, amid a then-weak outlook for the company. In March, they opted to sell 6.67 percent of their stake in a block sale instead.
Uphill Battle
The Hynix capital spending plan comes as the global chip sector has shown signs of turning around since last year on the back of rising demand for consumer electronics gadgets from China and increasing sales of memory chip-embedded digital devices such as smartphones.
The chip industry has stayed in the doldrums over the past several years, and manufacturers scaled back capital spending due to sluggish demand.
With a pickup in demand, leading semiconductor manufacturers are speeding up their move to increase their spending to expand production capabilities to meet this.
Samsung Electronics, the world’s top vendor of memory chips, will announce its biggest ever investment plan in a single year, today, in a bid to solidify its leading position in the industry.
Analysts expect the capital spending to reach up to 20 trillion won, which will be invested in memory chips and LCDs.
Japan's Toshiba is also expected to join the moves to increase production capacity.
Hynix trails Samsung Electronics in the global DRAM memory sector, while it also ranks No. 3 in the world in NAND flash memory chips, used in products such as digital cameras, music players and smartphones.
Hynix, which supplies flash memory chips to Apple for its iPod and iPhone products as well as mobile DRAM chips for the iPad, is competing with Japan’s Toshiba for the second position in the global market for NAND chips.
The company posted a record profit of 817.2 billion won during the January-March period compared with a 1.19 trillion won loss a year earlier as demand for PCs and a shortage of chips drove up prices. It was the biggest profit since the fourth quarter of 2006.
Citing data from research firms, Hynix expects the global revenue for DRAM chips, which temporarily holds data and helps computer processors run multiple programs simultaneously, to reach $25.3 billion this year and to rise to $30.4 billion in 2012.
However, there are concerns that chipmakers may face a backlash from their aggressive drive to boost investment as such a move can result in another oversupply, which will deteriorate their profitability over time. |
