SK Hynix Q2 Sales Surpass 13 Trillion Won for the First Time...Cloudy Outlook for Second Half (Summary)

[Asia Economy Reporters Sunmi Park and Hyunseok Yoo] Despite challenging business conditions such as inflation and the prolonged Russia-Ukraine war, SK Hynix has recorded quarterly sales exceeding 13 trillion won for the first time. Although there has been a global decline in prices for some memory semiconductors like DRAM, the company is analyzed to have improved profitability by increasing overall sales volume and enhancing the yield of its main products. However, with memory semiconductor demand expected to further slow down in the second half of the year, SK Hynix must carefully review its investment plans and respond flexibly to changes in the business environment.

◆ SK Hynix Achieves Record Quarterly Sales in Q2 = SK Hynix surpassed 13 trillion won in quarterly sales and posted operating profits exceeding 4 trillion won. On the 27th, SK Hynix announced its Q2 earnings, reporting sales of 13.811 trillion won, operating profit of 4.1926 trillion won (operating margin 30%), and net profit of 2.8768 trillion won (net margin 21%) for the second quarter of this year.

Notably, this is the first time SK Hynix has achieved quarterly sales in the 13 trillion won range. The company’s previous highest quarterly sales was 12.3766 trillion won recorded in Q4 last year. An SK Hynix official explained, “Although DRAM product prices declined in Q2, NAND prices rose, and overall sales volume increased, leading to higher sales. The continued strength of the dollar and the addition of Solidigm’s performance also contributed positively.”

Solidigm, the NAND business unit acquired from Intel, has been a key contributor to SK Hynix’s improved performance since becoming a subsidiary at the end of last year. According to market research firm Omdia, combined NAND flash sales of SK Hynix and Solidigm reached $3.229 billion in Q1, with $987 million attributed to Solidigm. SK Hynix ranks third in overall market share behind Samsung and Kioxia, but the acquisition of Solidigm has nearly closed the gap with Kioxia. Moreover, despite the decline in memory semiconductor prices, Solidigm’s high-value-added enterprise SSDs helped defend against average selling price declines.

Another highlight of SK Hynix’s results is the profitability improvement driven by yield enhancements. SK Hynix recovered operating profits above 4 trillion won and operating margins in the 30% range within two quarters, following Q4 last year. This was due to improved yields of its main products, the 10nm-class 4th generation (1a) DRAM and 176-layer 4D NAND, which boosted profitability.

An SK Hynix official stated, “Despite difficult business conditions such as global inflation, the prolonged Russia-Ukraine war, and COVID-19 lockdowns in some regions of China, profitability has actually improved.”

◆ Memory Semiconductor Demand Slowdown Inevitable in Second Half = SK Hynix expects memory semiconductor demand to weaken in the second half of the year. Shipments of PCs, smartphones, and other devices containing memory are forecasted to decline more than initially predicted. Additionally, demand for server memory supplied to companies operating data centers is being closely monitored for potential slowdown as customers prioritize depleting existing inventory. While demand for IT devices surged due to the expansion of non-face-to-face systems amid COVID-19, recent inflation and recession concerns have intensified, leading to simultaneous contraction in personal consumption sentiment and corporate cost-cutting efforts.

According to market research firm TrendForce, DRAM prices are expected to fall by more than 10% in Q3. NAND price decline forecasts have also been revised from an initial 3-8% to 8-13%. Securities firms also anticipate a downward trend in memory prices in the second half. Choi Doyeon, a researcher at Shinhan Financial Investment, explained, “Set shipments are falling short of expectations, causing inventory increases among upstream companies. These companies are reducing order volumes compared to original plans to ease inventory burdens, which is expected to lead to increased inventory for manufacturers in Q3.”

However, SK Hynix remains optimistic about steady long-term growth in memory demand for data centers. Regarding future management plans, SK Hynix expects Q3 shipments to be significantly lower than originally forecasted and plans to carefully review next year’s investment plans while monitoring product inventory levels in the second half.

SK Hynix Business Officer Noh Jong-won said, “Although global economic uncertainty has recently increased, we remain confident in the long-term growth potential of the memory industry. The company will focus on strengthening fundamental business competitiveness while flexibly adapting to changes in the business environment.”

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