Eldest Brother Samsung Electronics Followed by SK Hynix Also Forecasted to Deliver 'Surprise Earnings'

3Q Operating Profit Expected at 1.3 Trillion Won, Up 175% YoY
Late Quarter Sales Increase from China Huawei Effective
4Q to See 'Pause'... Industry Conditions Expected to Improve Significantly from Next Year

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Following Samsung Electronics, the top company by market capitalization in the domestic stock market, SK Hynix, ranked second in market cap, is also expected to post better-than-expected third-quarter earnings. Analysts attribute this to increased sales to Huawei in the final part of the quarter.

According to financial information provider FnGuide on the 12th, SK Hynix's consolidated earnings forecast (consensus) for the third quarter of this year is sales of 7.8802 trillion KRW and operating profit of 1.3017 trillion KRW. Compared to the same period last year, sales are expected to increase by 15.2% and operating profit by 175.4%, marking a 'surprise performance.' Following Samsung Electronics, whose operating profit rose 58% year-on-year to 12.3 trillion KRW, SK Hynix, which was affected by the decline in DRAM prices, is also expected to show strong results.

Despite the average selling prices of major products all declining, performance improved as SK Hynix fulfilled emergency procurement orders from China's Huawei from late August through last month. As the U.S. Department of Commerce prepared to enforce sanctions preventing domestic companies from supplying semiconductors to Huawei, Huawei sought to secure urgent supplies, benefiting SK Hynix. This was enough to offset even the downward trend in prices of key semiconductors such as DRAM and NAND flash. Ji-hye Moon, a researcher at Shin Young Securities, explained, "The selling price to Huawei was slightly higher than the average selling price, positively impacting memory manufacturers' third-quarter earnings," adding, "It is estimated that SK Hynix's server DRAM inventory reached a safe stock level due to Huawei's emergency procurement."

However, it is uncertain whether this strong performance will continue into the fourth quarter. The prevailing outlook is that semiconductor prices will continue to decline in the fourth quarter. Market research firm TrendForce raised its forecast for the price drop of server DRAM in the fourth quarter from 10-15% to 13-18%. Major customers, such as cloud service providers, have also cut back spending. Cloud companies, which had accumulated massive inventories in preparation for increased online traffic demand due to the rise of non-face-to-face activities amid the COVID-19 pandemic, reportedly requested price reductions. Although Amazon resumed server and memory purchases starting in the fourth quarter, overall server demand and shipments remain low, making a short-term price rebound unlikely.

Accordingly, the fourth quarter of this year is expected to be a period of consolidation, with a full-scale industry recovery anticipated from next year. This is because the DRAM market applying the new DDR5 standard is expected to grow significantly starting next year. Earnings growth from new product launches is also likely. SK Hynix already launched the world's first DDR5 DRAM on the 6th.

This content was produced with the assistance of AI translation services.