SK hynix shares drop as analysts expect bigger Q1 loss on chip price

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SK hynix Inc.’s operating loss for the first quarter could exceed 4 trillion won ($3.05 billion), according to a report from a Korean brokerage house, which is the lowest estimate for the world’s No. 2 memory chip manufacturer in recent months.

SK hynix shares closed at 79,100 won on Wednesday, down 2.47 percent from the previous day, a relatively heavy decline for the session given that the benchmark rose by 1.31 percent.

The share drop came after Daeshin Securities Co. said in a report that SK hynix’s first-quarter operating loss is estimated at 4.2 trillion won, a revision from its projection of 3.9 trillion won last month. The bigger loss is attributed to a continued decline in product prices.

The average selling price of DRAM chips is estimated to have declined 28 percent on year in the first quarter from 23 percent, said Wi Min-bok, an analyst at Daishin Securities.

Other securities firms also revised their forecasts for SK hynix’s losses. Eugene Investment & Securities Co. had estimated the chipmaker’s operating loss at 3 trillion won in early February, but the brokerage said on Wednesday it could widen to 3.9 trillion won.

IBK Investment & Securities Co. also changed its forecast to 3.23 trillion won from 2.24 trillion won.

While there is also hope that this downturn cycle could end early, the situation is more severe than during the previous downturn cycle in 2008-2009, said Kim Woon-ho, an analyst at IBK Investment.

SK hynix is expected to reduce its facility investment, while coming up with more measures to cut production. The company’s capex spending this year is expected to stand at 8 trillion won, down 58 percent on year, the analyst said, adding that although the company did not disclose specific numbers, it is expected to reduce its wafer input by about 30 percent in the first half of the year.

However, analysts predicted that SK hynix earnings would bottom out in the first quarter and gradually improve. The operating loss could be narrowed to 2.9 trillion won in the second quarter, Wi said.