SK Hynix, the world's second-largest memory chip maker: profit plunges 60%
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Update time : 2022-10-27 10:41:28
South Korean chipmaker SK Hynix said on Wednesday that the memory chip market is facing "unprecedented deterioration", with its third-quarter 2022 profit plunging 60 percent below expectations due to soaring inflation.
"At the moment, the supply exceeds demand situation will continue." The world's second-largest memory chip maker said in a statement, pointing to a decline in laptop and smartphone shipments. The company said it plans to reduce investment by more than 50 per cent year-on-year next year. The drop in profits was attributed to severe inflation that has affected demand for electronic devices and the memory chips in them. SK Hynix's quarterly operating profit fell to 1.66 trillion won (US$1.16 billion) in the July-September period this year, compared with 4.2 trillion won in the same period last year. The result was below analysts' expectations of a 1.87 trillion won profit, according to Refinitiv SmartEstimate. SK Hynix said prices for DRAM chips used in devices and servers fell by about 20 per cent in the third quarter compared to the second quarter. Prices for NAND flash chips used in the data storage market fell more than 20 per cent. The dismal results echoed those of its bigger rival Samsung Electronics, which saw its third-quarter results decline, and its US counterpart Micron Technology, which warned of a sharp drop in PC and smartphone sales. Until earlier this year, chipmakers had been enjoying a strong increase in demand following the outbreak, which led to shortages of certain chips and disrupted production of cars and various electronic devices. But in recent months, chip demand has weakened sharply as soaring inflation, rising interest rates and a gloomy economic outlook have led consumers and businesses to tighten their spending. According to analysts Canalys, the global smartphone market shrank by 9 per cent year-on-year during July-September this year, the worst third quarter since 2014. DRAM chip prices are expected to fall further this quarter as memory chip companies lose bargaining power with customers, said Wi Min-bok, an analyst at Dah Sing Securities. These customers have stockpiled a large number of chips but are currently having difficulty clearing them due to weak demand. SK Hynix joins the ranks of chipmakers who have started to cut back on supply and investment as the oversupply of memory chips is expected to continue into the first half of next year. Micron plans to cut its investment by more than 30 percent next year; TSMC has also cut its investment plans for 2022. SK Hynix said its investment in 2022 is expected to be in the "upper range of 10-20 trillion won". Despite the current decline in demand for server storage chips, SK Hynix expects demand for server storage chips to increase in the long run as hyperscale data centres continue to invest to meet the growth of industries such as artificial intelligence, big data and the metaverse. SK Hynix's revenue declined 7% year-on-year to KRW10.98 trillion in the third quarter of 2022.
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