SK Hynix has worst quarter since 2016 as pricing weak

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SK Hynix has worst quarter since 2016 as pricing weak

SK Hynix reported a 93 percent drop in operating profit in the third quarter on-year and its lowest quarterly result in three years.

DRAM and NAND memory-chip demand has started to rebound and will continue to do so next year, SK Hynix said, but the company will maintain a conservative stance on investments as uncertainties persist globally.

According to the Thursday earnings announcement, the chipmaker generated 472.6 billion won ($402.7 million) in operating profit between July and September, a 93 percent decline on-year. Sales during the same period totaled 6.8 trillion won, a 40 percent fall on-year.

Third-quarter sales were up 6 percent from the second quarter, as memory demand recovered, but operating profits plummeted 26 percent on-quarter as average DRAM prices fell by 16 percent on-quarter.

In unit terms, DRAM shipment rose 23 percent on-quarter as data center purchases increased. DRAM demand from data centers pushed company results to record highs in 2017 and 2018, but stockpiling and conservative purchase decisions took a toll on the chipmaker’s first-half performance.

During a conference call, the company said that its DRAM stock level was close to the “normal level,” at around five weeks. Four to seven weeks of stock is considered safe.

The third quarter was the first quarter this year in which inventories declined.

Faster demand recovery was spotted in the NAND memory chip market. Average prices increased 4 percent on-quarter. But as with DRAMs, the demand rebound was not enough for a recovery in profitability.

Despite successfully cutting costs, a return to black for NAND was unlikely to happen in the near future, SK Hynix said.

As for 2020, SK Hynix has high hopes for the mobile market, where 5G phones are expected to be rolled out in great numbers. As they transfer more data and enable downloads of massive files in seconds, 5G phones come with larger memory chips.

“We expect growth for 5G phones to be bigger next year - with figures suggested by our clients, 5G phone sales are expected to hit 200 million units next year, while this year it was a few million units,” the company said during the conference call.

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