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FILE PHOTO: Employees walk past the logo of SK Hynix at its headquarters in Seongnam, South Korea, April 25, 2016. REUTERS/Kim Hong-Ji
SEOUL :South Korea’s SK Hynix Inc, the world’s no. 2 memory chipmaker, warned demand is likely to slow in the second half of the year as customers brace for recession, after booking its biggest second-quarter profit since 2018.
SK Hynix executives warned during an earnings call that customers are cutting costs noticeably and reducing investment out of recession concerns, hitting server chip demand and corporate PC demand, in addition to already slowing consumer demand for smartphones and PCs.
Server chips had been the only remaining bright spot in memory chip demand that drove SK Hynix to report a 56 per cent jump in operating profit to 4.2 trillion won ($3.2 billion) in the April-June quarter, with large data centre firms such as Amazon meeting rising cloud demand.
“As a general trend, customers are holding more (memory chip) inventory for all applications” like PC, smartphone and servers, SK Hynix said. The firm’s own inventory has gone up by about a week’s worth of chip sales as of end-June compared with end-March.
Insight from key customers showed long-term demand for cloud services is still expected to expand, the company said. But short-term component shortages, macroeconomic uncertainty, and the hit to consumer-sector demand is turning server clients conservative in spending for the second half, SK Hynix said.
Given the uncertain environment, SK Hynix said it may decide on 2023 business plans as soon as late August and is looking at several scenarios, including a considerable reduction to its capital expenditure plans next year.
Although SK Hynix plans to continue with infrastructure investment such as securing land and utilities for future plants, it can reduce investment in chip equipment, it said.
Rising inflation, concerns about a downturn in major markets, and repeated COVID-19 lockdowns in China have resulted in slowing smartphone sales.
U.S. chipmaker Texas Instruments on Tuesday forecast sustained demand from industrial and automotive customers, but said it was seeing weaker demand “particularly from customers in personal electronics market.”
A clutch of chipmakers including Micron Technology Inc have warned of a rising chip glut after a two-year long global shortage of chips.
In the company’s second-quarter results, a strong dollar also offset higher material costs. SK Hynix’s chip sales are booked in the U.S. dollar, which hit a 20-year high in the period, boosting the value of its operating profit reported in Korean won by about 400 billion won, the company said.
Revenue climbed by a third on the year to a quarterly record 13.8 trillion won.
Meanwhile, parent SK Group said on Tuesday it plans to invest $15 billion in the semiconductor industry in the United States through research and development programs and the creation of an advanced packaging and testing facility.
SK Hynix is expected to carry out the $15 billion investment, the company said.
($1 = 1,310.3400 won)
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