SK hynix loses almost $2 billion as memory market collapses

SK hynix, the world’s second largest memory chip maker, lost nearly $2 billion in the first quarter as overcapacity and weak pricing in memory continued to be a drag on earnings.

An SK hynix factory in Chungju, North Chungcheong [SK HYNIX]

SK hynix, the world’s second largest memory chip maker, lost nearly $2 billion in the first quarter as overcapacity and weak pricing in memory continued to be a drag on earnings.

It logged a net loss of 2.6 trillion won ($1.9 billion) in the first three months of the year, followed by a record net loss of 3.5 trillion won in the fourth quarter.

The company’s stock jumped by 2.22 percent following the earnings report released Wednesday, boosted by the hope that the semiconductor industry bottomed out in the first quarter.

The loss, a dramatic shift from nearly 2 trillion won of net profit during the same period last year, was still less than the market consensus of a 3.47-trillion-won loss.

Its operating loss came in at 3.4 trillion won, below the market estimate of 3.6 trillion won, which was tracked by FnGuide.

The Icheon, Gyeonggi-based chip producer posted 5.1 trillion won in sales, down 58.1 percent on year.

“As the memory chip downturn continued through the first quarter, the company posted a sequential drop in revenues and widened operating loss on sluggish demand and falling product prices,” SK hynix said in a statement.

“But we expect revenue to rebound in the second quarter after bottoming out in the first, driven by a gradual increase in sales volume,” it said.

The rationale behind the positive outlook is the belief that the current supply glut is beginning to ease especially after Samsung Electronics, the world’s largest memory chip producer, announced a cutback in production.

SK hynix and Micron made it clear last year that they are slashing facility investment and production, but Samsung made it official only earlier this month that it is cutting production to a meaningful degree.

“The company forecasts an improvement in market conditions from the second half of 2023, as memory inventory levels at customers declined throughout the first quarter, while inventory across the memory industry is expected to improve from the second quarter, with a production cut by suppliers taking into effect,” it said in the statement.

With reduced investment, the chipmaker will focus on high-end products such as DDR5s and HBMs. HBMs, in particular, have enjoyed a surge in demand as they are used in training generative AI systems like ChatGPT.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]