SK hynix posts second quarterly loss as chip demand remains weak

SK hynix Inc. headquarters in Icheon, Gyeonggi Province [Photo by Yonhap]

SK hynix Inc., the world’s second-biggest memory chipmaker, posted its second quarterly loss due to the prolonged downturn in the global semiconductor market.

Operating loss in the first quarter was 3.4 trillion won ($2.54 billion), compared with a profit of 2.86 trillion won a year earlier, SK Hynix said in a regulatory filing Wednesday. This is the biggest three-month loss since the company came under SK Group in 2012 and was worse than the Yonhap Infomax estimate of 3.56 trillion won.

SK hynix posted an operating loss of 1.89 trillion won in the fourth quarter of last year, marking the first quarterly loss in a decade since the third quarter of 2012. The combined loss for the two consecutive quarters amounted to over 5 trillion won. Sales plummeted 58.1 percent to 5.09 trillion won with a net loss of 2.59 trillion won.

The company attributed the losses to ongoing weak sales of memory chips. However, it said market conditions are expected to improve in the second half of the year as customer inventories has started to drop in the first quarter and supplier inventories are expected to decline in the second quarter due to memory production cuts.

“The memory market, which is still under tough conditions, seems to be bottoming out,” said Kim Woohyun, chief financial officer of SK hynix. “We will make all efforts to restore the corporate value by focusing on improving profitability and technology development as we believe that the market will soon find a balance.”

Earlier, Samsung Electronics Co. announced that its operating profit for the first quarter was estimated at 600 billion won, down 95.8 percent from a year ago. Unlike Samsung Electronics, which has a more diversified business, SK hynix was hit harder because memory business accounts for more than 90 percent of its total sales.

The problem is that the industry has not seen the bottom yet. It is still hard to be optimistic about the DRAM industry until inventories are cleared out.

“It is difficult to expect a significant rebound in demand in the first half of the year,” said Kim Woon-ho, an analyst at IBK Investment & Securities Co. “Inventories will continue to grow through the second quarter.”

SK hynix is expected to post an annual loss this year for the first time in 11 years since 2012. There are also concerns that the company will post an operating loss of more than 10 trillion won this year.

“Inventories at customers remain high and shipment of memory semiconductors have been much lower than expected,” said Kim Rok-ho, an analyst at Hana Securities Co. “It will be difficult to expect an improvement in second-quarter results from the previous quarter due to the large price decline relative to the increase in shipments.”

Still, SK hynix believes that the growing market for high-performance servers for artificial intelligence and the increasing number of customers adopting high-capacity memory will have a positive impact on its future business.

SK hynix plans to increase sales by focusing on DDR5 for servers, high-performance DRAM such as HBM, SSDs based on 176-layer NAND, and multi-chip package (uMCP) products.

“With our world-class competitiveness in our product lineup, including DDR5-LPDDR5 and HBM3, where demand growth is expected to begin in earnest this year, we will solidify our leadership in the premium market,” SK hynix’s Kim said.