SK Hynix Reports 6.3 Trillion KRW Loss in H1... "Expecting Performance Improvement from High-Value Products"

Negative Growth Continues Since Q4 Last Year
Q2 Sales at 7.3059 Trillion KRW, Down 47.1%
DRAM ASP Rises from Previous Quarter... Hopes for Second Half

SK Hynix suffered a direct hit from the semiconductor market downturn, recording an operating loss of over 6 trillion won in the first half of the year alone. However, the increase in sales of high-value-added products led to a rise in DRAM prices, reducing the scale of performance decline compared to the previous quarter. In the second half of the year, the company plans to continue investing in high-value-added products by increasing production cuts, focusing on NAND flash, which has slower inventory depletion than DRAM.

SK Hynix announced on the 26th that it posted a consolidated operating loss of 2.8821 trillion won in the second quarter, turning to a deficit compared to the same period last year. During the same period, sales fell 47.1% year-on-year to 7.3059 trillion won, and net loss amounted to 2.9879 trillion won.

SK Hynix recorded an operating loss of 3.4023 trillion won in the first quarter. This means the total deficit for the first half exceeded 6 trillion won. Following an operating loss of 1.7012 trillion won in the fourth quarter of last year, marking the first quarterly loss in 10 years, the company has posted losses for three consecutive quarters.

However, the company reduced the scale of the performance decline compared to market expectations. According to the average forecast for the second quarter compiled by financial information firm FnGuide, sales were expected to be 6.2663 trillion won and operating loss 2.8943 trillion won. Compared to the previous quarter, sales increased by 44% and operating loss decreased by 15%.

Partial view of SK Hynix Icheon Campus / Photo by SK Hynix

SK Hynix stated that sales of DRAM and NAND increased in the second quarter compared to the first quarter. The bit growth rates (bit unit shipment growth rates) for DRAM and NAND in the second quarter rose by the mid-30% and 50%, respectively. In the case of DRAM, the generative artificial intelligence (AI) market, centered on ChatGPT, expanded rapidly, causing a surge in demand for AI server memory, leading to increased sales of premium products such as high-bandwidth memory (HBM)3 and double data rate (DDR)5 DRAM.

Although prices of general products like DDR4 DRAM fell due to weakness in the PC and smartphone markets, the increase in the average selling price (ASP) of DRAM by a high single-digit percentage compared to the first quarter, driven by sales of high-end products, contributed to the performance improvement. Currently, HBM prices are 6 to 7 times higher than DDR4 DRAM.

The outlook for the third quarter is expected to improve. This is because strong AI memory demand continues and the effect of production cuts in the memory semiconductor industry is beginning to take full effect. Donghee Han, a researcher at SK Securities, said, "SK Hynix, the main player in the HBM3 market, will see its DRAM operating profit recover faster than the industry," and predicted, "It will turn profitable in the third quarter."

[Image source=SK Hynix Q2 Earnings Presentation Materials]

SK Hynix plans to accelerate performance improvement in the second half by increasing sales centered on HBM3, a memory for AI, high-performance DDR5 DRAM, low-power (LP) DDR5, and solid-state drives (SSD) based on 176-layer NAND. Preparing for the upcoming market boom, the company will increase the proportion of mass production of high-value-added products, but will increase the scale of production cuts for NAND, whose inventory reduction speed is slower than that of DRAM.

Kim Woo-hyun, SK Hynix's Chief Financial Officer (CFO), said, "The policy to reduce overall investment by more than 50% compared to last year remains unchanged," but added, "We will continue to invest in expanding production capacity (capability) for high-capacity DDR5 and HBM3, which will lead future market growth, using resources secured through management efficiency improvements."

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