SK hynix widens quarterly losses as chip glut intensifies


Seoul, Apr 26 (IANS): SK hynix said on Wednesday it logged losses for the second consecutive quarter, as a worsening macroeconomic climate dented demand for semiconductors used in PCs and other digital products, and a continued chip glut wiped out profits.

The world's second-largest memory chip maker said in a regulatory filing its operating losses amounted to 3.4 trillion won ($2.5 billion) in the first quarter, compared with a profit of 2.86 trillion won a year ago.

Net losses came to 2.58 trillion won, turning from a profit of 1.98 trillion won a year earlier. Sales fell 58.1 percent to 5.08 trillion won, reports Yonhap news agency.

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

"But we expect revenues to rebound in the second quarter after bottoming out in the first, driven by a gradual increase in sales volume."

The company is pinning its hopes on the growth of the high-performance server market for artificial intelligence and a wider adoption of high-capacity memory products to drive demand and boost sales in the second half.

The South Korean chipmaker swung to a deficit in the fourth quarter last year for the first time since the third quarter of 2012, as its customers halted new orders to reduce their excessive inventories amid slow consumer demand.

SK hynix makes most of its profits from selling memory chips. But the macroeconomic woes, including the ongoing war between Russia and Ukraine, inflation and rising interest rates, led consumers to tighten their spending on electronics that need such semiconductors.

Global PC shipments are estimated to have declined more than 30 percent from a year ago in the first quarter, while smartphone sales are believed to have fallen around 12 percent.

At an earnings call, the chipmaker said it "is taking a flexible and responsive approach" to its production operations.

"The memory industry currently faces a supply demand mismatch, as well as inventory levels that are unprecedented in scale and their magnitude in recent history," it said.

Given the "grave" market conditions, the company said it will maintain "conservative production plans until we see a more balanced supply demand situation, as well as more adequate inventory levels."

In October, SK hynix said it would reduce its investment by slightly more than half this year from last year's 19 trillion won, citing a precipitous fall in demand.

Meanwhile, the chipmaker said it was carefully reviewing long-term geopolitical risks arising from the Washington-Beijing tech rivalry to determine the direction of its future Chinese operations.

"We are looking at various different scenarios," the company said, while adding, "Nothing is set in stone yet or has significantly changed our current operations there.

"Our current focus is on maintaining the stability of our China fab operation. And we are also positive towards our likelihood of receiving an extension for the U.S. government's waiver on equipment export controls into China."

SK hynix shares closed at 87,400 won, up 2.22 percent from the previous day, outperforming the wider market's 0.17 percent decline, on hopes that the chip downturn is nearing its end.

 

  

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Title: SK hynix widens quarterly losses as chip glut intensifies



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