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SEOUL—HYNIX
Semiconductor Inc., the world’s second-largest
memory-chip maker, plans to start producing
digital-camera components after a three-year ban on new
types of products ended this month.
Hynix is
seeking allies to start production of so-called CMOS
chips that convert light into digital signals, chief
executive officer Kim Jong Kap said. It had been
prevented from entering such businesses under a 2002
bailout, which led to a Citigroup Inc. buyout fund
acquiring the Korean chipmaker’s nonmemory unit to help
stave off bankruptcy.
“We will
be trying to forge alliances with the major players in
this sector,’’ Kim said in an interview in
Seoul.
Hynix
shares had tumbled 32 percent this year as an oversupply
of memory chips eroded prices and cut profit. Sales
growth for CMOS chips, a market led by Micron Technology
Inc., may be seven times faster than for memory chips
this year because of increasing demand for cameras and
mobile phones that can take higher-resolution pictures,
according to research firms.
“Nonmemory does improve Hynix’s product portfolio,’’
said Lee Seung Jun, who oversees about $1.5 billion at
CJ Asset Management Co. in Seoul. Still, “it won’t have
a significant impact on earnings for the time being.’’
Hynix
this month reported profit that fell more than analysts
estimated because of declining chip prices. Spot prices
for the benchmark dynamic random access memory, or DRAM,
chip have slumped 80 percent this year to a record low,
according to Dramexchange.com,
Asia’s biggest spot market for chips.
Kim said
an oversupply of memory chips “will last until the end
of this year.’’
“Demand
has been on the rise for quite a long period of time but
supply has exceeded demand,’’ he said.
Global
sales of memory chips may rise 2.2 percent to $59.8
billion this year, according to World Semiconductor
Trade Statistics, an industry group. That’s a slowdown
from last year’s 21-percent pace. By contrast, CMOS chip
sales may rise 15 percent to $4.2 billion, according to
Gartner Inc.
Canon
Inc., the world’s largest maker of digital cameras, last
week raised its annual sales forecast to 25 million
units from a previous estimate of 24 million. Camera
sales growth averaged 17 percent in the past two years,
outpacing computer peripherals, Canon’s biggest
business.
Nokia
Oyj, the world’s biggest maker of mobile phones, this
month reported an 85-percent increase in third-quarter
profit after sales of handsets including the N95
multimedia phone with high-resolution camera and
navigation capability increased.
Hynix’s
stock has lagged behind its biggest rivals in memory
chips this year. Samsung Electronics Co., the world’s
largest memory-chip maker, fell 11 percent and Toshiba
Corp., the second-largest maker of memory chips for
consumer electronics rose 25 percent. Samsung and
Toshiba also make image sensors.
“To
compensate for lost time, Hynix’s likely option is to
partner with a bigger maker or a fabless design
manufacturer,’’ said Lee Sun Tae, an analyst at Meritz
Securities Co. in Seoul, without naming potential
candidates. “Strengthening non-memory shows Hynix’s will
to make money in this business as the outlook is
positive on higher demand.’’
Boise,
Idaho-based Micron, the world’s largest maker of CMOS
image sensors, posted an operating loss of $280 million
in the year ended August 30 because of a glut of memory
chips. Still, it posted a profit of $8 million from
image sensors.
Micron
said in its annual report last week it may seek
“partnering arrangements’’ for its imaging business,
while continuing to make CMOS image sensors.
Stock of
OmniVision Technologies Inc., the world’s second-largest
maker of image sensors in 2006, has soared 59 percent
this year. The Sunnyvale, California-based company in
August forecast quarterly earnings that beat analyst
estimates.
Hynix is
about 36-percent owned by Korea Development Bank and
other financial companies, which spent $4.6 billion this
decade bailing out the chipmaker. Last month the banks
hired Credit Suisse Group to advise them on options for
their stake, which they’re able to sell after December
31.
“We
would be better if somebody will be buying the stake to
run the company forever,’’ Kim said. “I don’t know about
potential bidders abroad, but in Korea I’ve been
informed that there are around four or five potential
candidates.’’
Hynix’s
shares trade at 10 times the company’s estimated
earnings, less than the average 15.5 times for stocks on
the benchmark Kospi index. The stock is undervalued, Kim
said.
“Even
taking into account the industry downturn, the shares
have fallen too much,’’ Kim said. “We are very
successful in moving to next-generation technologies,’’
he said. “If our investors know more about what is going
on at Hynix, then they will be more relieved.’’ ---With
reporting by Joshua O’Connor in Seoul. |
