SK Hynix Inc.

The positive outlook on Hynix reflects our view of a more than one-third likelihood that we will raise the rating if the company maintains its strong operating performance and positive free cash flows over the next one to two years. This is despite Hynix's somewhat aggressive capital investments over the period. We may raise the rating if Hynix sustains its operating performance and generates positive free operating cash flows despite modestly weakened market conditions. This assumes that the company will maintain a net cash position and reduce business volatility, mainly by enhancing its position in the NAND flash market. We could revise the outlook to stable if Hynix's profitability and operating cash flows weaken more than we expect, possibly due

...Consolidation in the DRAM industry should support Hynix's strong, albeit softer, operating performance over the next 12 to 24 months. Although we expect the global memory chip market to face downward pressure over the next 12 to 24 months, we believe the highly consolidated nature of the dynamic random access memory (DRAM) industry could limit the decline in SK Hynix Inc.'s operating performance. Under our base case, we expect Hynix's EBITDA to peak at around Korean won (KRW) 26 trillion¡KRW30 trillion in 2018, and fall to around KRW16 trillion-KRW23 trillion over the next two years....

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