SK Hynix Inc. posted third-quarter earnings that fell short of analyst estimates after boosting investment in production to capture a rally in memory chip prices.
Operating profit rose five-fold to 3.74 trillion won ($3.3 billion) in the September quarter, the Icheon, South Korea-based company said in a statement Thursday. That was less than the 3.81 trillion-won average of estimates compiled by Bloomberg. Shares of SK Hynix fell as much as 3.2 percent before trading 1.4 percent lower as of 9:22 a.m in Seoul.
SK Hynix is using the buoyancy in chip prices to bolster its position in the industry with increased spending. The company is part of a group led by Bain Capital that agreed to buy Toshiba Corp.’s memory business while also investing in its own production. Hynix ranks fifth in NAND market share even though it trails only Samsung Electronics Co. in DRAM.
“Because there was so much profit, Hynix aggressively entered costs into the books. A lot went to investment,” said Greg Roh, an analyst at HMC Investment Securities Co. Roh expects earnings in the current quarter of 4.2 trillion won, with DRAM prices continuing their rise next year.
SK Hynix said sales for the quarter climbed to 8.1 trillion won with net income of 3.06 trillion won, both of which topped analyst projections.
Apple Inc., which plans to launch its 10th-anniversary iPhone next month, is Hynix’s largest customer, providing about 10 percent of its sales, according to data compiled by Bloomberg. Intel Corp. and Samsung also receive supplies from Hynix.
Hynix and Samsung control more two thirds of the DRAM market. DRAM chips, along with NAND flash memory, are used in smartphones, tablets, personal computers and game consoles.
Contract prices for 32 gigabyte DRAM server modules climbed 7.2 percent in the September quarter from the June period while prices for 128 gigabit MLC NAND flash memory chips rose 4.7 percent in the same period, according to inSpectrum Tech Inc.
Hynix spent about 5 trillion won increasing its production capacity in the first half of this year and has signaled plans for further investment.