'Earnings Shock' SK Hynix Q3 Operating Profit Down 60%... "Next Year Investment to Be Cut by More Than Half"

Seasonal Peak in Q3, Yet an 'Earnings Shock'

[Asia Economy Reporter Park Sun-mi] SK Hynix recorded an 'earnings shock' in the third quarter of this year due to the global memory semiconductor market downturn. Despite the third quarter being a seasonal peak, operating profit fell to less than half compared to the same period last year. SK Hynix plans to reduce production cuts and investments by more than 50% compared to this year.

On the 26th, SK Hynix announced that its third-quarter sales and operating profit were 10.9829 trillion KRW and 1.6556 trillion KRW, respectively, down 7% and 60% from the same period last year. Compared to the second quarter, which recorded the highest sales ever, sales and operating profit decreased by 20% and 61%, respectively. The operating profit margin was 15%, down 20 percentage points from the same period last year. Net profit also shrank by 67% to 1.1027 trillion KRW compared to the same period last year.

SK Hynix diagnosed that the memory semiconductor industry is facing an unprecedented market downturn due to ongoing uncertainties in the business environment. This is because consumer sentiment has weakened amid global economic uncertainties, leading to a decrease in shipments from companies producing PCs and smartphones, the main consumers of memory products.

As demand for DRAM and NAND products weakened, SK Hynix's third-quarter average selling price (ASP) for both DRAM and NAND dropped by about 20%. Memory customers, who are depleting their inventories, are postponing purchases anticipating further price declines amid weak demand. SK Hynix explained that although cost competitiveness improved by increasing the sales ratio and yield of the latest process 10nm 4th generation DRAM (1a) and 176-layer 4D NAND, operating profit significantly decreased because the price decline exceeded the cost reduction.

The memory semiconductor market is expected to continue experiencing supply exceeding demand for the time being. Accordingly, SK Hynix stated that this year's investment amount will increase to the 10 trillion KRW level compared to last year, but next year's investment is being considered to be cut by more than 50% compared to this year. This is a significant level of investment reduction comparable to the industry's production capacity cuts during the global financial crisis when the semiconductor market was unfavorable in 2008-2009.

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