The rating on Hynix Semiconductor Inc. reflects the volatility of the company's earnings base, stemming from its high reliance on cyclical, competitive, and capital-intensive semiconductor operations, particularly commodity-like dynamic random-access memory (DRAM) products. The rating also takes into consideration Hynix's still weak overall financial profile. The prospects for Hynix's profitability and cash flow protection measures are worsening amid a severe market downturn in the company's mainstay DRAM business. DRAM prices have fallen drastically beyond expectations in recent months, which is placing severe pressure on the company's earnings generation and weakening its financial flexibility. In the second quarter of 2001, the company posted an operating loss of Korean won (W) 266 billion, compared with an operating profit of W69 billion in
