Chipmaker SK Hynix’s losses widen after tech slump deepens
SK Hynix posted its second straight quarterly loss after revenue plummeted about 60 per cent during the memory industry’s deepest downturn but the company signalled the worst is over.
The memory chip supplier to Apple reported an operating loss of 3.4 trillion won (S$3.4 billion) for the three months that ended in March. That compares with the average analyst estimate for a 3.46 trillion won loss.
“The memory market, which is still under tough conditions, seems to be bottoming out,” chief financial officer Kim Woohyun said in a statement. SK Hynix said it expects sales to rebound in the current quarter and memory market conditions to improve from the second half of this year.
Hynix shares rose about 2 per cent in early Seoul trading.
Hynix’s losses show the slump that has gripped the US$160 billion global memory industry, which has been sitting on months’ worth of unused inventory after global electronics demand cratered in the wake of a Covid-era boom. Companies from Apple to Lenovo Group are struggling with a slide in demand as consumers and corporations cut spending to deal with inflation and a potential recession.
After a series of production cuts in the industry, Hynix said memory inventory levels at clients fell throughout the first quarter.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The positive signal follows a rare decision by Samsung Electronics — by far the world’s biggest producer of the components vital to most devices — to join the industry’s memory production cut. Samsung said it’d cut memory production to a “meaningful level” after reporting its slimmest profit since the 2009 financial crisis, potentially easing the glut.
The move spurred optimism that the industry — infamous for its boom and bust cycles — will climb out of its trough this year. Much may depend on the Chinese economic rebound — the country remains the world’s largest market for PCs and smartphones — which by some estimates is uneven but gaining steam.
Micron Technology, the largest US maker of memory chips, had already said client inventories were declining. And even before Samsung’s decision, Hynix executives had said previously planned production cuts that should take effect in the second half and could help prop up prices.
Before Samsung’s cut, analysts including Yuanta Securities’s Baik Gilhyun had predicted prices of Dram — a type of memory used to process data — would fall in the current quarter, further eroding margins. That follows a roughly 20 per cent slide in the previous three months and a more than 30 per cent drop in the fourth quarter of 2022.
Longer term, it’s unclear how a US-China conflict over technology and semiconductors might affect the industry. Beijing launched a security review of chips from Micron this month, spurring concerns the Chinese government is taking a more aggressive line towards American companies. The country is among Korea’s largest export destinations, and both a key market as well as a production base for companies from Samsung to Hynix.
South Korean President Yoon Suk Yeol is visiting the US capital this week and discussions are likely to centre on Korea’s role in curbs on chip and chip gear sales to China, part of Washington’s effort to contain a geopolitical rival. In particular, a blockade on shipments of equipment for advanced chipmaking threatens to curtail Hynix’s Chinese base, which cranks out an estimated one-third to half of its Dram for global markets.
The US has asked Yoon’s administration to urge Samsung and Hynix to resist boosting chip sales to China if Beijing bars Micron from selling there, the Financial Times reported this week, citing people familiar with the situation. BLOOMBERG
Share with us your feedback on BT's products and services
