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Semiconductors

South Korea's SK Hynix ramps up spending to meet chip shortage

Chipmaker posts 66% jump in Q1 profit

Demand and prices for NAND memory chips are increasing faster than expected.   © Reuters

SEOUL, (Reuters) - SK Hynix, the world's No.2 memory chip maker, said on Wednesday it will bring forward planned capital spending as it joins rivals in ramping up chip production to meet a global semiconductor shortage.

The South Korean firm posted a 66% jump in first-quarter profit on continued stay-at-home demand for devices and forecast strong demand for chips over the rest of 2021.

"The company expects customers' chip inventory to decrease quickly as current stronger-than-expected demand growth in the broader IT market continues," it said in a statement.

SK Hynix, which competes with bigger rival Samsung Electronics Co, said supplies were expected to remain tight throughout the year for DRAM chips that are widely used in laptops and other computing devices.

It forecast a faster-than-expected increase in demand and prices for NAND memory chips that serve the data storage market.

SK Hynix, which spent 9.9 trillion won ($8.9 billion) on capex in 2020, did not specify how much of its planned 2022 capital spending would be brought forward to the second half of 2021.

Earlier this month, Taiwan Semiconductor Manufacturing Co (TSMC) unveiled a plan to invest $100 billion over the next three years to increase capacity, days after Intel Corp announced a $20 billion plan to expand its capacity.

The company, which counts Apple Inc among its customers, reported an operating profit of 1.3 trillion won ($1.17 billion) in January-March, up from 800 billion won a year earlier.

That was below a Refinitiv Smartestimate of a 1.4 trillion won profit, drawn from 20 analysts. The Smartestimate gives more weight to consistently accurate analysts.

First quarter revenue rose 18% on-year to 8.5 trillion won.

Strong sales of smartphones and personal computers during the period drove demand for memory chips, supporting SK Hynix's strong earnings, analysts said.

Shipments of personal computers during the quarter jumped 55% on-year, a sharp contrast from a decline in the PC market of about 2% a year over the past decade, according to NH Investment & Securities.

Shares in SK Hynix fell 2.6%, lagging a 0.2% drop in the broader market, after its quarterly profit slightly missed analysts' expectations.

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