SK hynix swings to profit, remains cautious on facilities investment

SK hynix plans to maintain a conservative approach to facilities investment despite reporting its first profit in a year in the October-December period of 2023 and drawing a rosy picture for premium memory chips.

SK hynix headquarters in Icheon, Gyeonggi [NEWS1]

SK hynix plans to maintain a conservative approach to facilities investment despite reporting its first profit in a year in the October-December period of 2023 and drawing a rosy picture for premium memory chips.

"The increment on capital expenditure will be kept to a minimum," the company said.

The Korean chipmaker posted 346 billion won ($259 million) of operating profit during the fourth quarter of last year as demand for advanced memory chips, including high bandwidth memory (HBM), surged on the back of the global AI boom.

The Korean memory chipmaker had reported 1.9 trillion won of operating loss a year earlier amid a severe market downturn.

In an earnings surprise announced Thursday, the Korean memory chipmaker's result largely exceeded the market consensus of 51.5 billion won of operating loss in the fourth quarter of 2023.

Its revenue came to 11.3 trillion won, a 47 percent year-on-year jump, hovering over the market consensus of 10.5 trillion won.

While forecasting that the market recovery will continue until 2025, SK hynix maintained a conservative stance in making facilities investments.

"Experiencing a rapid downturn in 2023, we have no choice but to make investment decisions with a different perspective for the future compared to the past," said the company's chief financial officer (CFO) Kim Woo-hyun in a conference call.

"We are not going to make a supply glut cycle situation like the past. We believe that investment should be made on products that have guaranteed profitability and demand considering rapidly increasing investment cost."

SK hynix will utilize existing facilities to handle the rising demand for advanced memory chips.

It said it will ultimately shift the production process of its factory in Wuxi, China, to the fourth generation of 10-nanometer and make chips like DDR5 or LPDDR5 from the current second generation.

The idle space at its existing M15 and M16 fabrication plants in Icheon, Gyeonggi will also be utilized to produce advanced memory chips like HBM.

"We are considering utilizing existing fabrication plants for as long as possible," the CFO said.

Affected by a severe cyclical downturn in 2023, SK hynix halved facilities investment from the previous year's 19.7 trillion won.

SK hynix, on the same day, announced its plan to provide incentives of 2 million won and 15 company shares to its employees.

"Distributing company shares is to encourage SK hynix employees to participate in elevating the company's future value," the company said. "This is in line with CEO Kwak Noh-jung's announcement of achieving a market valuation of 200 trillion won in three years."

For the full year, SK hynix turned to red in 2023 by posting 7.7 trillion won of operating loss compared to 6.8 trillion won of operating profit in 2022. Revenue plunged by 27 percent from 44.6 trillion won to 32.8 trillion won.

SK hynix shares closed at 137,400 won Thursday, down by 2.9 percent compared to the previous trading day.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]