"Securing Ammunition for the Future"... SK Hynix Increases Cash Assets by 1 Trillion Won

Last Year's Cash and Cash Equivalents 4.9482 Trillion KRW
Up 24% Year-on-Year...Turning to Growth After 3 Years
Improved Profits Amid Lower Capital Expenditure and Dividend Payout Ratio
Semiconductor Capital Investment Expected to Expand This Year

[Asia Economy Reporter Suyeon Woo] SK Hynix's cash and cash equivalents increased by nearly 1 trillion KRW compared to the previous year, marking a turnaround to an upward trend after three years. While last year's net profit more than doubled compared to the previous year, the company adopted a conservative approach to capital expenditures and lowered its dividend payout ratio, accumulating resources for the future.

According to SK Hynix's 2020 business report released on the 23rd, the company's cash and cash equivalents reached 4.9482 trillion KRW last year, an increase of 953.5 billion KRW (24%) compared to the end of the previous year. SK Hynix's cash equivalents had risen to the 8 trillion KRW level during the semiconductor industry's 'super cycle' in 2017 and 2018, but fell to the 3 trillion KRW level in 2019.

As the market conditions began to recover last year, operating cash flow increased significantly while capital expenditures were reduced, expanding cash equivalents back to around 5 trillion KRW. Last year, SK Hynix executed conservative capital expenditures amounting to 9.9 trillion KRW. This figure is about 22% lower than the 12.7 trillion KRW spent in 2019, when net profit declined due to poor market conditions. The investment ratio relative to sales also dropped from the 40% range in 2018?2019 to 31% last year.

Regarding dividends, which use cash equivalents as a resource, the dividend payout ratio also decreased compared to the previous year. Although the dividend per share and total dividend amount increased, the payout ratio?representing total dividends as a percentage of net income?fell from 34% in 2019 to 16.8% last year.

This cash reserve strategy of SK Hynix aligns with SK Group Chairman Chey Tae-won's 'selection and concentration' strategy. Recently, SK Group has been pursuing a strategy of selling unprofitable businesses or unnecessary assets and focusing capabilities on future new businesses. SK Innovation is pushing to sell its shale oil field stakes and related facilities in North America, while SK Telecom sold its professional baseball team, SK Wyverns, to the Shinsegae Group.

Industry experts expect SK Hynix, now armed with cash reserves, to expand investments in facilities and mergers and acquisitions (M&A) this year, reflecting improvements in the semiconductor market. Due to the global semiconductor supply shortage affecting the entire manufacturing sector worldwide, semiconductor companies' investment expansion is inevitable. According to the Semiconductor Equipment and Materials International (SEMI), global semiconductor equipment investment is expected to increase by 16% to 74 billion USD (approximately 82 trillion KRW) this year compared to the previous year.

Last year, SK Hynix carried out a large-scale M&A by acquiring Intel's NAND business division, and this year completed the construction of a new semiconductor plant, the 'M16' factory, in Icheon, Gyeonggi Province. Additionally, it is reported that the company is currently reviewing new investments in its Wuxi plant in China.

Last month, SK Hynix secured advanced cutting-edge process equipment by signing a 5-year contract worth 4.75 trillion KRW with ASML for EUV equipment. SK Hynix plans to pay the acquisition amount for Intel's NAND business division in two installments at the end of this year and the end of 2025, and the EUV equipment contract with ASML will also be paid in installments as individual equipment is acquired.

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