South Korean Chip Makers 3Q Profit Likely Softer on Won Strength

Dow Jones09-04

0338 GMT - South Korean memory-chip makers are likely to post softer-than-expected 3Q earnings due to the won's strength, Nomura analysts say. The won has strengthened against the dollar since its June peak, weighing on Samsung Electronics and SK Hynix, both of which generate all their revenue in dollars, say the analysts led by CW Chung in a note. A 10% appreciation of the won could reduce the chip makers' profits by 12%, they note. FactSet data show the dollar weakened about 11% against the won over the past three months. Nomura expects Samsung and SK Hynix to post below-consensus operating profits of 107 trillion won and 77 trillion won, respectively, in 3Q. However, Nomura expects the negative foreign-exchange impact to be offset by higher chip prices amid tight supply.

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