Since the SK Group purchased Hynix in 2012, the South Korean chipmaker SK Hynix has announced a record quarterly operating loss of 3.4 trillion won ($2.54 billion) for the first quarter of 2023. The loss is more than the operating loss of 1.89 trillion won in the preceding quarter and a reverse from the operating profit of 2.84 trillion won in the same time last year. The company’s financial report states that total sales decreased 58% from the previous year to 5.09 trillion won.
The memory chip slump persisted into the first quarter, which the business blames for the expanding operational losses. It also blames the decline in pricing for its products and the slow demand. The memory industry’s inventory is anticipated to increase starting in the second quarter, according to SK Hynix, the second-largest memory chip manufacturer in the world, as a result of suppliers’ output cuts. The business also expects a comeback in the second half of the year, driven by the expanding high-performance server market for AI and a larger customer adoption of high-capacity memory products.
The shares of SK Hynix increased by 1.75% in afternoon trading on Wednesday after rising as much as 3.5% earlier. To date, the stock has increased by 16%. According to James Lim, senior research analyst at Dalton Investments, the chip sector has “passed the bottom” and is “slowly grinding toward a recovery,” and revenues are anticipated to grow in the second quarter after bottoming out in the first due to a steady increase in sales volume.
Sanjeev Rana, head of research for South Korea at CLSA, said he still believes SK Hynix’s profitability would decline more in the second quarter. Despite the anticipated supply reductions, memory chip prices might still decline between 10% and 20% in the second quarter, putting pressure on average selling prices and, in turn, the company’s profitability.
Rival On Thursday, Samsung Electronics is expected to release first-quarter financial results. In a forecast released earlier this month, the world’s largest chipmaker predicted that operational profit for the first quarter will probably total 600 billion Korean won ($449 million). If the forecast holds true, the company’s earnings would be at its lowest level since the first quarter of 2009.
Following similar actions by SK Hynix and Micron, Samsung Electronics said at the beginning of April that it will reduce chip output by a “meaningful” amount. The supply reductions by Samsung, according to Lim, “are going to give [SK Hynix and Micron] a breather.” He said that if chipmakers make even more drastic cutbacks, the market may soon approach a “inflection point,” which may not be too far away.
The short-term memory chip sector is anticipated to have difficulties as chipmakers continue to feel the impact of the market slump. The industry’s long-term prospects are still promising, though, because to the rising need for big data analytics, artificial intelligence, and high-performance computing. High-capacity memory devices will be required as the demand for these applications rises, creating major growth prospects for the memory chip manufacturers.