SK hynix Q3 op­er­at­ing profit plunges 93%

The Korea Times - - BUSINESS - By Baek Byung-yeul [email protected]­re­atimes.co.kr

SK hynix saw its op­er­at­ing profit plunge 93 per­cent in the third quar­ter from a year ear­lier, hit by fall­ing mem­ory chip prices and slug­gish global de­mand, the chip-mak­ing arm of SK Group said Thurs­day.

In its third-quar­ter earn­ings re­port, the com­pany logged 6.83 tril­lion won ($5.83 bil­lion) in sales and 472.6 bil­lion won in op­er­at­ing profit, down 40 per­cent and 93 per­cent from the same quar­ter in 2018.

This is the first time the chip­maker has posted an op­er­at­ing profit be­low 500 bil­lion won since the sec­ond quar­ter of 2016 when it posted 452.8 bil­lion won.

SK hynix rode high on a semi­con­duc­tor su­per-cy­cle for the past two years thanks to soar­ing de­mand for mem­ory chips for cor­po­rate servers and data cen­ters.

How­ever, the com­pany has suf­fered dra­matic falls in 2019 be­cause of de­creased mem­ory chip de­mand from global IT com­pa­nies, stag­nant smart­phone sales, and grow­ing un­cer­tain­ties caused by trade dis­putes be­tween the U.S. and China and be­tween Korea and Ja­pan.

The com­pany elab­o­rated its profit was de­creased by al­most one-tenth be­cause its ef­forts to de­crease pro­duc­tion costs of mem­ory chips couldn’t off­set the price de­cline.

“The rev­enue in the third quar­ter in­creased by 6 per­cent quar­ter-on-quar­ter as de­mand be­gan to pick up. How­ever, the op­er­at­ing profit fell by 26 per­cent quar­ter-on-quar­ter as the DRAM unit cost re­duc­tion was not enough to off­set the price drop,” the com­pany said.

The world’s sec­ond-largest mem­ory chip­maker said its DRAM sales in­creased by 23 per­cent from the pre­vi­ous quar­ter, but the av­er­age sell­ing price was de­creased by 16 per­cent as it saw a con­tin­ued price de­cline.

For the NAND flash mem­ory chips, the com­pany fo­cused more on the high-den­sity mo­bile and solid state drives (SSDs) mar­kets, which are show­ing signs of re­cov­ery, but the sales vol­ume was de­creased by 1 per­cent from the pre­vi­ous quar­ter.

As the slug­gish semi­con­duc­tor de­mand is ex­pected to be pro­longed, the com­pany said it will de­crease its in­vest­ment and pro­duc­tion ca­pac­ity for both DRAM and NAND flash mem­ory chips.

It will trans­form part of the DRAM pro­duc­tion line in its M10 plant in Icheon, Gyeonggi Prov­ince, to CMOS im­age sen­sor pro­duc­tion lines and de­crease pro­duc­tion ca­pac­ity of 2D NAND flash chips as well.

“As a re­sult, both DRAM and NAND flash ca­pac­ity will de­crease next year com­pared to this year, and the amount of in­vest­ment is ex­pected to shrink con­sid­er­ably next year as well,” SK hynix said.

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