SK Hynix Faces 3Q Decline Amid Memory Slump... "Will Cut Investment and Production Next Year" (Update)

Sales of 10.9829 trillion KRW, operating profit of 1.6556 trillion KRW, net profit of 1.1027 trillion KRW
Next year's investment scale to be reduced by more than 50% compared to this year
Production cuts also planned focusing on low-profit products

Partial view of SK Hynix Cheongju campus / Provided by SK Hynix

[Asia Economy Reporter Kim Pyeonghwa] SK Hynix recorded a decline in the third quarter due to the sluggish semiconductor market centered on memory. Operating profit decreased by more than 60% compared to the same period last year and the previous quarter, amounting to 1.6556 trillion KRW. SK Hynix announced that it will overcome the market downturn by enhancing price competitiveness through preemptive technology acquisition, reducing investment scale by more than 50% next year, and adjusting production volume to balance market supply and demand.

SK Hynix disclosed on the 26th that it recorded sales of 10.9829 trillion KRW and operating profit of 1.6556 trillion KRW in the third quarter of this year. Compared to the same period last year, sales and operating profit decreased by 7% and 60%, respectively. Compared to the previous quarter, these figures decreased by 20.5% and 60.5%. The operating profit margin was 15%, and the net profit margin was 10%.

SK Hynix explained that sales decreased compared to the previous quarter as both sales volume and prices fell due to weak demand for DRAM and NAND products amid a worsening global macroeconomic environment. Although the company improved cost competitiveness by increasing the sales ratio and yield of the latest processes such as 10nm 4th generation DRAM (1a) and 176-layer 4D NAND, operating profit also significantly declined because the price drop exceeded the cost reduction.

SK Hynix diagnosed that the memory semiconductor industry is facing an unprecedented market downturn as uncertainty in the business environment continues. The shipment volume of companies producing PCs and smartphones, which are major consumers of memory, is decreasing, accelerating this market situation.

However, SK Hynix forecasts that although memory demand for data center servers may decline in the short term, it will steadily grow in the mid to long term. This is because the scale of new industries such as artificial intelligence (AI), big data, and the metaverse is expanding, and large data center companies continue to invest in these areas.

SK Hynix stated, “As the company leads the latest DRAM technologies such as high-bandwidth products HBM3 and DDR5/LPDDR5, our position will be solidified in terms of long-term growth potential. We developed the industry's first 238-layer 4D NAND in the third quarter of this year, and by expanding mass production next year, we are confident that we will secure cost competitiveness and continuously improve profitability.”

Since the supply exceeds demand for the time being, SK Hynix plans to reduce next year's investment scale by more than 50% compared to the expected investment amount in the high 10 trillion KRW range this year. Production will also be reduced, focusing on relatively less profitable products. The company plans to maintain a policy of investment reduction and production cuts for a certain period to normalize the market supply-demand balance.

SK Hynix’s Business Officer No Jongwon said, “Based on our resilience that has always turned crises into opportunities throughout our history, we will overcome this downturn and leap forward as a true leader in memory semiconductors.”

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