SK hynix reports big miss in 2022 and massive 4th quarter loss

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SK hynix reports big miss in 2022 and massive 4th quarter loss

Published: 01 Feb. 2023, 16:37

SK hynix workers hold wafers at a company factory in Icheon, Gyeonggi. [REUTERS]

SK hynix posted weaker-than-expected results last year as a downturn in the memory chip business and big inventories ate away at profitability.

The Icheon, Gyeonggi-based chip producer reported 2.4 trillion won ($1.9 billion) in net profit last year, down 74 percent on-year and far short of the market consensus of 4.8 trillion won.

Its full-year operating profit fell 43.5 percent to 7 trillion won, lower than the market estimate of 7.5 trillion won published by FnGuide.

Revenue edged up 3.8 percent to 44.6 trillion won, missing the consensus estimate at 45 trillion won.

A crash in memory chip prices accelerated toward the end of 2022, leaving SK hynix with record losses in the final quarter.

Its net loss came to 3.52 trillion won in the fourth quarter, swinging from a profit of 3.31 trillion won in the year-earlier prior and short of a consensus of minus 1.2 trillion won.

SK hynix explained that both operating and non-operating factors, like losses from its investments in companies like Kioxia, affected the result.

On an operating basis, the company lost 1.7 trillion won in the last quarter of the year, the first such loss since the third quarter of 2012, when prices of dynamic-random access memory (DRAM) plunged and SK hynix reported an operating loss of 252.3 billion.

“Revenues continued to grow last year, but the operating profit decreased compared with a year earlier as the industry entered into a downturn from the second half,” the company said in a statement. “With uncertainties still lingering, we will continue to reduce investments and costs, while trying to minimize the impact of the downturn by prioritizing markets with high growth potential.”

The company also said that inventories continued to grow and the value of the stock fell, resulting in a charge.

"In the fourth quarter, we observed that inventory levels grew and its value also deteriorated compared to the previous quarter. Overall, the company recognizes up to a 700 billion won loss from the decreased inventory valuation," one company representative said during the conference call.

Unlike Samsung Electronics with its diversified range of semiconductors, SK hynix is heavily reliant on memory chips, making it vulnerable to cyclical downturns. Over 90 percent of its revenues come from memory products like DRAM and NAND flash chips.

NAND flash, which generates 31 percent of revenue, was hit harder in the fourth quarter than DRAMs.

To navigate the challenging conditions, the company will stick with the previous plan to cut investments by more than half compared with 19 trillion won in 2022, SK hynix said during a conference call Wednesday, adding that no further cuts are planned beyond what has been announced.

It will reorient the investment toward high-end products to ensure profitability and technological capability.

“Intel’s launch of new server CPU adopting DDR5 and apparent positive signs of demand for new AI-based server memory chips bode well for a quick business turnaround,” Chief Financial Officer Kim Woo-hyun said.

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