Hynix SemiconductorQ2 2011 Earnings

July 21st, 2011

Disclaimer

This material contains forward-looking statements which can be subject

to certain risk and uncertainties that could cause actual results to differ

materially.

As of January 1, 2011, Hynix Semiconductor Inc. adopted International

Financial Reporting Standards (K-IFRS). All financial information

contained in this document is based on consolidated K-IFRS. For the

convenience of users, financial results of 2010 are presented based on

K-IFRS and may differ from previously disclosed financial information

provided based on K-GAAP.

Review of the Q2 FY2011 financial results has not been finalized. Figures

in this earnings release are subjected to changes during the

independent auditing process.

1. Q2 2011 Earnings Results & Operations

2. Q3 2011 Market Outlook

Contents

Q2 2011 Earnings Results (K-IFRS) & Operational Performances

Results of Operations

Unit: KRW Billion Q2 ‘11 QoQ Q1 ‘11 Q2 ‘10 YoY

Revenue 2,758 -1% 2,793 3,280 -16%

Gross Income 631 -7% 681 1,382 -54%

Operating Income 447 38% 323 1,016 -56%

EBITDA 1,311 13% 1,161 1,775 -26%

Net Income 473 73% 274 719 -34%

EPS(Won) Basic 796 463 1,234

Diluted 709 462 1,126

Number of Shares (Million Shares)

Basic 592 591 590

Diluted 629 592 628

Gross Margin 23% -1%p 24% 42% -19%p

Operating Margin 16% +4%p 12% 31% -15%p

EBITDA Margin 48% +6%p 42% 54% -6%p

Net Margin 17% +7%p 10% 22% -5%p

Sales Analysis

Total Q2 revenue decreased slightly due to higher-than-expected ASP drop and the effect of KRW appreciation

against US dollar.

• DRAM sales reduced as: ASP declined 1%, Bit shipment remained flat (QoQ)

• NAND Flash sales increased as: ASP declined 19%, Bit shipment increased 36%(QoQ)

76% 73%

23% 25%

1% 2%

Q1' 11 Q2' 11

DRAM NAND Others

2.79 Tr. 2.76 Tr.

0%

50%

100%

Q1 '10 Q2 Q3 Q4 Q1 '11 Q2

PC Server Graphics Consumer Mobile

PC

High 20%

Non-PC

Low 70%

Slight Revenue decrease(1% ↓)

Sales by Products Sales % by Application

※ MCP Sales portion increased from 9% to 11%(QoQ).

Profit Analysis

• Operating profit and margin improved because of the reversal effect of provisions for the Rambus case, however, those from

pure operating activities diminished due to ASP decline which surpassed unit cost reduction.

(+) factor: Reversal of a portion of provisions for the Rambus patent case

(-) factors: Decrease of operating profit and margin by memory ASP drop, loss from inventory valuation

OPMargin

EBITDAMargin

Net Margin

26%31%

28%

11% 12% 16%

838 864

323 447

Q1 '11 Q2 '11

D/A Operating Profit

D/A3%↑

EBITDA13% ↑

1,311

1,161

Q1’10

51% 54% 53%

41% 42%48%

29%22%

32%

1%

10% 17%

Q2 Q3 Q4 Q1’11 Q2

Profitability Profitability Ratio

Unit : KRW Billion

Non-OP Income & Expense

Unit: KRW Billion Q2 ‘11 QoQ Q1 ‘11 Q2 ‘10 YoY

Non-Operating Income, Net 26 67 (41) (296) 322

Financial Income, Net (66) - (66) (73) 7

FX Transaction & Translation, Net 64 -15 78 (215) 279

Others 28 82 (53) (8) 36

Income Taxes (1) -8 8 9 -10

* Cash = Cash & Cash Equivalents + Short-term Financial Instruments

** Debt = Short-term Borrowings + Current position of Long-term Borrowings + Convertible Bond + Debenture + Long-term Borrowings

Capital Structure

Unit: KRW Billion Q2 ‘11 QoQ Q1 ‘11 Q4 ’10 YoY

Asset 17,516 139 17,377 17,468 -946

Cash* 1,780 -313 2,092 2,202 427

Liability 8,957 -320 9,277 9,491 -1,922

Debt** 6,184 -47 6,231 6,041 -1,141

Shareholder’s Equity 8,559 459 8,100 7,977 976

Capital Stock 2,978 7 2,971 2,969 10

Retained Earnings 4,484 471 4,013 3,828 1,672

BPS (Won) 13,310원 12,646원 12,488원

Debt-to-Equity Ratio 72% -5%p 77% 76% -25%p

Net Debt-to-Equity Ratio 51% - 51% 48% -28%p

Migration Progress

DRAM NAND Flash

* Quarter-end, Package out basis

0%

50%

100%

Mar. '10 Jun. Sep. Dec. Mar. '11 Jun.

Others 5Xnm 4Xnm 3Xnm

Mar. '10 Jun. Sep. Dec. Mar. '11 Jun.

4Xnm & Others 4Ynm 3Xnm 2Xnm

Q3 2011 Market Outlook

Market Outlook - DRAM

• Despite entering the traditional peak season, demand is expected to be lower than usual seasonality as customers are still

reluctant to change their conservative purchasing practices under the sluggish recovery of global economy.

• Strong demand for server DRAM is forecasted to continue thanks to DRAM contents growth per system and increased

server demand, but competitive pricing among suppliers is also expected to increase.

• The launch of new smartphone models is expected to boost mobile DRAM demand in 2H, while lower-than-expected tablet

PC demand could negatively affect to some extent.

2628

29

31

10.0

15.0

20.0

25.0

30.0

35.0

0

100

200

300

400

500

600

700

800

900

1,000

Q1 '11 Q2 Q3E Q4E

Total Demand Avg. GB/Box

*. Source: Hynix Marketing (excluding PC Server / Desktop,Notebook, Netbook Only)

2011 PC Market Outlook 2011 Server DRAM Market Forecast

*. Source: Hynix Marketing

(Mil. units, 1Gb eq. )

(Mil. units) 2010 2011 G/R

Shipment 10.4 11.4 9%

Avg. GB 20.1 28.6 42%

(Million units)

2.6 2.7 2.8 2.8 3.1 3.3

3.5 3.7

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Q1'10 Q2 Q3 Q4 Q1'11 Q22 Q33 Q44

Avg. GB/Box

-7%-1%

8%5%

-11%

3%

11% 10%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

0

20

40

60

80

100

120

140

160

Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3E Q4E

Netbook Notebook Desktop QoQ G/R

365347

3.5GB

2.8GB

Market Outlook - NAND Flash

• While global economic uncertainties have a potential to soften NAND demand growth, NAND market is expected to

stabilize on the back of a relatively stronger seasonality than DRAM’s.

• Still smartphones and tablet PCs will drive NAND consumption, SSD is forecasted to become an important demand driver

with the increasing adoption into PCs such as Ultra-book.

• Mass production from suppliers’ new fabs will begin in earnest, however, the increase in demand is anticipated to fully

absorb the incremental supply.

WW NAND Revenue Trend Key NAND Demand Drivers

*. Source: iSuppli as of Q2 2011

9 21 42 18 55 92

305

443

566

71 GB

95 GB

131 GB

31 GB 34 GB43 GB

6 GB8 GB 11 GB

-120 GB

-70 GB

-20 GB

30 GB

80 GB

130 GB

-100

100

300

500

700

900

1,100

1,300

1,500

2010 2011E 2012E

Smartphone Tablet PC SSD

S T SP

*. Source: Hynix Marketing

-9%

-3%

-10%

1%

-14%

-10%

-3%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Q110 Q210 Q310 Q410 Q111 Q211 Q311E Q411E

WW NAND Revenue(US$ Mil.) 1GB Eq. Units(in Milions)

QoQ ASP change(Million units)

Q3 2011 Hynix Guidance

DRAM (1Gb eq.) NAND Flash (16Gb eq.)

Q3 Shipment High teen %↑ Around 20% ↑

Q3 Sales Breakdown by Application

PC: around 30%

Non-PC: around 70%

USB & Card: around 30%

Embedded NAND: around 70%

Q3 Capacity (12” eq.) around 300Kwpmaround 130Kwpm

(M11: around 110Kwpm)

2011 CapexTotal KRW 3.4 Tri.

(approx. DRAM 75%, NAND 25%)

[ Appendix ]

[Attachment1] Proforma Statement of Financial Position

K-IFRS (KRW Billion)

Q2'11 Q1'11 Q4'10 QoQ YoY

Assets

Current Assets 5,172 5,276 6,545 -104 -1,373

Cash & Cash Equivalents* 1,780 2,092 1,353 -313 427

Accounts Receivables 1,664 1,650 2,243 14 -580

Inventories 1,282 1,227 1,136 55 147

Other Current Assets 446 306 1,813 140 -1,367

Non-Current Assets

Investments 795 848 1,049 -53 -254

Property, plant & equipment 10,872 10,624 10,358 249 514

Intangible Assets 676 629 509 47 168

Total Assets 17,516 17,377 18,461 139 -946

Liabilities

Interest-bearing Debts 6,184 6,231 7,325 -47 -1,141

S-T Borrowings 1,278 948 1,510 330 -233

Current Portion of LT Borrowings 1,940 1,815 1,587 126 353

Debenture 2,101 1,877 2,146 224 -45

L-T Borrowings 865 1,591 2,081 -726 -1,216

Accounts Payables 638 681 836 -43 -198

Total Liabilities 8,957 9,277 10,879 -320 -1,922

Shareholders' Equity

Common Stock 2,978 2,971 2,969 7 10

Total Shareholders' Equity 8,559 8,100 7,582 459 976

* Short-term Financial Instruments included

[Attachment 2] Proforma Income Statement

K-IFRS (KRW Billion)

Q2'11 Q1'11 Q2'10 QoQ YoY

Sales 2,758 2,793 3,280 -35 -522

Cost of Goods Sold 2,127 2,112 1,898 15 229

Gross Profit 631 681 1,382 -49 -751

SG&A Expenses 374 348 394 26 -20

Other Operating Profit/Loss 190 -10 28 199 162

Operating Profit 447 323 1,016 124 -569

Finance Income/Expenses -66 -66 -73 0 7

F/X Effects 63 78 -215 -15 279

Gain(or Loss) on Equity Method 3 3 -1 1 4

Others 25 -56 -7 81 32

Income Before Income Taxes 472 281 720 191 -247

Income Taxes (Benefit) -1 8 9 -8 -10

Net Income 473 274 710 199 -237