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Hynix Semiconductor Q3 profit falls

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Hynix Semiconductor Inc. has announced that third-quarter profits fell a sharp 56% on a failure to achieve expected cost reductions and a slump in memory chip prices.

Hynix Semiconductor Inc. has announced that third-quarter profits fell a sharp 56% on a failure to achieve expected cost reductions and a slump in memory chip prices.

The South Korea company, the world's second-largest memory chipmaker, earned 168 billion won (US$182.9 million, €128.8 million) in the three months ending 30 September 2007. Hynix posted net profit of 384 billion won a year earlier.

The result, Hynix's second straight profit decline, was far worse than expected. The average estimate of nine analysts surveyed by Dow Jones Newswires forecast that the company would post a net profit of 373.2 billion won (US$406.2 million, €285.9 million).

Sales during the quarter rose 28% to 2.34 trillion won (US$2.55 billion, €1.8 billion) from 1.82 trillion won a year earlier. Analysts expected sales of 2.47 trillion won (US$2.69 billion, €1.89 billion).

James Kim, head of investor relations at Hynix, attributed the decline in net profit largely to a failure to achieve expected cost reductions of about 30% amid a transition to more advanced technology. A decline of 55-60% in prices for dynamic random access memory (DRAM) chips in Q3 from the same period last year also hurt profitability, he added.

The market for memory chips is subject to severe seasonal and cyclical price swings with Q3 and Q4 usually being the strongest. But, according to Kim, this did not happen in Q3 because of the oversupply situation in the industry.

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