Draining chip demand encourages SK hynix to sell water facilities

SK hynix headquarters in Icheon, Gyeonggi [NEWS1]

SK hynix plans to sell off its water treatment facilities to secure an estimated 1 trillion won ($766 million) in the face of deteriorating financial conditions caused by slumping demand for chips.

The memory chipmaker said Monday it is considering selling its water treatment facilities in Icheon, Gyeonggi to SK reit, SK Group's real estate investment trust subsidiary.

The chipmaker will rent the facilities from SK reit after the selloff, the company said.

“With facilities investment in the semiconductor industry expanding globally, it has become a trend to make investments through loans and improve financial solvency with asset liquidation,” SK hynix said in a statement Monday.

“In line with such a trend, the company plans to push for liquidation of the water treatment facilities which is a non-core asset.”

The company said it will use the secured funds in “developing technology” and making investments in “future industries.”

SK reit filed for the deal’s approval with the Ministry of Land, Infrastructure and Transport, with plans to finish the sell-off process by the end of this year. The two companies plan to put the deal on the board meeting agenda scheduled for later this month.

“It has become important for companies to stably manage the financial structure and make assets slimmer amid an uncertain environment,” said Kim Woo-hyun, chief financial officer, at SK hynix.

SK hynix has been grappling with a sharp downturn in the chip industry since last year.

It reported a net loss of 2.6 trillion won in the first quarter of this year amid slow chip demand while supply glut continued.

It consequently raised $1.7 billion in April through its first convertible bond sales in a decade.

The chipmaker's debt came to 43.3 trillion won in the first quarter of this year, a 20 percent increase from the previous year.

Its debt-to-asset ratio hit 71.1 percent in the first quarter of this year, a major increase from 56.9 percent a year ago.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]