SK hynix reporting best-ever sales 2021 makes $2 bn capex in China

[Photo provided by SK hynix Inc.]

(Updated with conference call comments, additional data)

South Korea’s SK hynix Inc. ending 2021 with record sales is recapitalizing its Chinese operation by $2 billion for upgrade and expansion upon acquisition of Intel’s NAND facility to further cement leadership in memory.

The new spending is to improve its production plant in Wuxi, responsible for half the DRAM output for SK hynix, and undergoing migration to next-gen processing.

The world’s second largest memory and third largest chip maker in its regulatory filing on Friday reported an operating profit of 4.22 trillion won ($3.5 billion) on a consolidated basis for the quarter ended December, up 1.1 percent from a quarter ago and 340 percent from a year earlier.

Net profit added 0.1 percent on quarter and 87.5 percent on year to 3.32 trillion won, while sales rose 4.8 percent from three months ago and 55.4 percent from a year earlier to 12.38 trillion won.

For the full 2021, SK hynix’ operating profit soared 147.6 percent on year to 12.41 trillion won, the largest since 20.84 trillion won in 2018 peak of super chip cycle. Net profit more than doubled to 9.62 trillion won. Sales climbed 34.8 percent to a fresh record high of 43 trillion won, above the 2018 peak of 40.45 trillion won.

SK hynix shares were trading 2.20 percent higher at 116,000 won in Seoul trading at 9:26 a.m. Friday.

The record-breaking results largely owed to growth in memory chip demand for servers and smartphones and increased prices amid fast digitalization under the virus situation. Server DRAM sales in the final quarter expanded to the largest since the third quarter of 2018.

The NAND flash business also has successfully returned to an operating profit last year based on record-high revenue from shipment growth of more than 60 percent on year.

“The results prove that the memory chip market has continued its growth despite the recent disruption in global supply chains,” said Noh Jong-won, chief financial officer.

SK hynix expected the supply disruption will be eased from the second half of the year.

“Demand for server DRAMs is estimated to grow near 30 percent, and enterprise SSD above 30 percent,” said Noh. On the back of the growth, DRAM production is projected to increase by near 20 percent, and NAND flash production by 30 percent this year.

“With the planned merger with Intel’s NAND flash business, SK hynix will be able to command the second-largest share in the NAND flash market. Developing own enterprise SSD based on Intel’s technical understanding would be very helpful to SK hynix,” added Noh.

SK hynix last month delivered $7 billion of $9 billion acquisition of NAND and SSD business from Intel and took command over the NAND fab in Dalian China. Once the remainder is paid by March 205, SK hynix moves to No. 2 on flash memory rank.

Separately, SK hynix said it will make a cash dividend payout of 1,540 won per common share, or 1.06 trillion won in total.

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