SK hynix reports a 57 percent rise in quarterly net profit

SK hynix's office in Bundang, Gyeonggi [NEWS1]

SK hynix reported a 57 percent rise in net profit to 1.99 trillion won ($1.73 billion) in the second quarter on year on strong chip sales and a recovery in margins.

The results were in line with expectations.

Revenue totaled 10.32 trillion won, up 20 percent on year. FnGuide analysts forecast 9.87 trillion won.

The performance was driven by strong sales of memory chips for PCs, graphics and servers as the pandemic continues to push people further into the digital world.

The average selling price for its dynamic random access memory (DRAM) and NAND flash memory chips rose by around 10 percent, according to the company during a conference call on Tuesday.

Operating margins were 26 percent, up three percentage points on year.

The quarterly results remain below the levels reached in 2018. Revenue hit 11.4 trillion won in the third quarter of that year.

The chipmaker predicts that the robust demand will continue through 2021 and possibly into 2021.

“This year’s demand is higher than expected as the popularity of 5G smartphones and PCs have led to a reduced inventory of chips,” said Noh Jong-won, executive vice president at SK hynix.

“Looking into the supply-demand state in the memory chip sector, the reduced inventory will likely run on through the end of this year and further through next year.”

Skeptics see a supply glut emerging, much like the excesses of 2019 after a strong 2018.

These concerns sapped investor sentiment for chip stocks recently, pushing the prices of Samsung Electronics and SK hynix to down in recent weeks.

In terms of production, SK hynix said it will focus on server DRAMs larger than 64 gigabytes to meet the need for high-capacity DRAMs.

For NAND flash, SK hynix plans to start mass production of the 176-layer NAND flash later this year while aiming to expand the sale of the 128-layer NAND flash, which was popular among its clients after its 2020 release.

The chipmaker also expressed hope that its NAND business will turn a profit in the second half of the year as the sector is posting losses due to heavy spending.

Touching on the company’s equipment and facility investment plans, Noh said that the scale will be the same as initially planned.

SK Hynix shares fell 0.85 percent Tuesday, despite a higher Kospi, hitting their lowest level since December 2020.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]