Apple demand buoys SK Hynix and LG Display

Jan 29, 2015

Apple’s record results have had a positive knock-on effect on its suppliers, with South Korea’s SK Hynix and LG Display both posting solid fourth-quarter earnings.

The two companies are among the main beneficiaries of the popularity of Apple’s larger-screen iPhone 6 and iPhone 6 Plus — smartphones whose popularity helped the California-based tech giant on Tuesday to report $18bn in net profit — the largest quarterly profit of any public company in history.

SK Hynix, the world’s second-largest memory chipmaker, on Wednesday reported a record net profit of Won1.62tn ($1.5bn) in the three months to December, more than double that of the same period a year earlier.

The company also posted record annual earnings, which rose 46 per cent year on year to Won4.2tn.

LG Display, the world’s biggest maker of LCD panels, reported its highest quarterly profit in almost four years, helped by strong demand from Apple and television makers.

Its operating profit more than doubled in the fourth quarter from a year earlier to Won625.8bn, the highest since the first quarter of 2011.

“They have definitely benefited a lot from strong iPhone demand, and such benefits are likely to grow bigger in the first quarter with Apple expected to launch a new smartwatch in April,” said Kim Young-woo, analyst at HMC Securities.

SK Hynix makes memory chips used in smartphones, tablets and PCs, while its processor chips power mobile devices. Analysts estimate Hynix earns about 9 per cent of its sales from Apple, which is the company’s second-largest customer, while the US group provides up to 15 per cent of LG Display’s sales.

SK Hynix also benefited from the woes of US rival Micron Technology, whose second-quarter sales forecast fell short of analysts’ consensus estimates. Shares of SK Hynix rose 30 per cent last year, outperforming a 5 per cent fall for the benchmark Kospi Composite index.

Chip prices remain solid amid tight supply after five years of intense competition whittled back the number of major D-Ram suppliers to three: Samsung, SK Hynix and Micron. Analysts expect the survivors to continue to enjoy hefty margins this year as they have gained bigger pricing power over customers.

“In the past, memory chipmakers competitively expanded capacity in the belief that they will fall behind otherwise,” said CW Chung, analyst at Nomura. “Now, with only three major players in the market and chip demand for mobile devices growing, that’s no longer the case.”

LG Display said it would pay a final dividend for 2014 of Won500 a share, its first such payout in four years, costing the group Won179bn.

Shares in LG Display fell 1.2 per cent while SK Hynix shares inched up 0.1 per cent on Wednesday. The Kospi index closed up 0.47 per cent.


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