SK Hynix scores record breaking annual sales, but 4Q net profit drop

The South Korean chipmaker has closed out its financial year with record sales, despite posting a downturn in its fourth quarter fortunes.

SK Hynix, South Korea's second largest semiconductor producer, announced on Tuesday record breaking sales for 2015 despite tepid demand for chips in a saturated smartphone market, and a sharp fourth quarter net profit loss.

The company announced a fourth quarter net profit of 871.3 billion won ($72.6 million), down 45.5 percent from its reported 1.6 trillion won ($1.33 billion) in the fourth quarter of 2014.

The fourth quarter net profit downturn can be attributed to weak demand for the smartphones that carry the supplier's chips amid an already saturated smartphone market and a gloomy overall international business outlook.

In addition to a sour net profit, fourth quarter sales and operating profits were down sharply as well. Sales in SK Hynix's DRAM chips and other products decreased 14.2 percent year-over-year to 4.4 trillion won and operating profits dropped to 988.8 billion won from 1.6 trillion won in the fourth quarter of 2014, a 40.7 percent loss.

Despite a weak fourth quarter, the company chalked up record breaking sales and revenues for 2015.

SK Hynix reported 18.8 trillion won in consolidated sales for the year, up 10 percent over 2014. The company's operating profits were 5.3 trillion won, 4 percent higher than in 2014, and its net income was 4.3 trillion won, an increase of 3 percent over 2014.

Two weeks before Tuesday's financial announcement, SK Hynix announced plans to invest 6 trillion won in R&D to develop new chips and production lines to counter a market saturated with PCs, tablets, and smartphones, which will likely only get more crowded as Chinese chipmakers enter the game and drag South Korean suppliers down.

SK Hynix said that it will start full-scale mass production of 2Znm DRAM chips and concentrate on developing 1Xnm DRAMs to strengthen its cost competitiveness and profit margin.

"Also, the company is to flexibly operate its DRAM portfolio to enhance the profitability," SK Hynix said in a statement accompanying the four quarter financials announcement.

For NAND flash chips, bit shipments increased 4 percent, but at a reduced average selling price, which dropped 15 percent.

SK Hynix is planning to raise its competitiveness in 3D NAND flash chips, and to further develop 1Ynm process technology. The company will start to mass produce 48-layer 3D NAND flash chips right after completing that development.

On a quarterly basis, both DRAM bit shipments and its average selling price declined by 1 percent and 10 percent, respectively.