SK Hynix "Possible Delay in Next-Generation Semiconductor Mass Production Due to Equipment Procurement Issues" (Comprehensive)

▲SK Hynix Icheon Campus view. (Provided by SK Hynix)

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[Asia Economy Reporter Kim Jin-ho] SK Hynix announced on the 27th that the global semiconductor equipment procurement issues recently emerging could cause delays in the mass production schedule of next-generation semiconductors.

No Jong-won, SK Hynix's Head of Business, said during a conference call following the first-quarter earnings announcement, "This year, the lead time for semiconductor equipment (the time from order to delivery) has lengthened, causing difficulties in equipment supply."

No said, "The mass production schedule for 10nm-class 4th generation (1a) DRAM and 176-layer NAND flash may be somewhat delayed compared to the plan set at the beginning of the year," adding, "The equipment lead time issue is a very practical problem that is causing real challenges in scaling up the initial production volume of semiconductor products with new technologies applied."

Regarding the 380 billion KRW sales warranty provision caused by quality degradation in some DRAM products, he expressed regret. No said, "We apologize to customers and investors," and added, "We have identified the root cause and strengthened quality verification processes under various conditions, and currently, the possibility of recurrence has been sufficiently minimized."

SK Hynix stated in the earnings announcement that in 2020, during the rapid increase in demand for DRAM, some process changes occurred, and quality degradation was reported in some of these products.

He also hinted at the possibility of additional expansion of semiconductor fabs beyond the semiconductor cluster industrial complex in Yongin. No said, "To respond to market demand over the next few years, we need to gradually increase production capacity based on wafers," and added, "We are considering preparations to expand fab space, including Yongin."

However, he added, "Nothing has been decided yet, and we will disclose information as soon as it is finalized."

Regarding this year's memory outlook, SK Hynix explained that DRAM demand is expected to increase by the high teens percentage, and NAND flash demand by 30%. Although uncertainty in consumer-related memory demand such as mobile and PC is high due to lockdowns in major Chinese cities caused by COVID-19, demand for server memory used in data centers is expected to be strong.

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SK Hynix held a management performance briefing and announced that in the first quarter of this year, it recorded sales of 12.1557 trillion KRW and operating profit of 2.8596 trillion KRW. Compared to the first quarter of last year, sales increased by 43%, and operating profit increased by 116%. Net profit also doubled from the first quarter of last year to 1.9829 trillion KRW.

First-quarter sales this year exceed those of the first quarter of 2018 (8.8197 trillion KRW), which was the peak period of the semiconductor industry, by more than 3 trillion KRW. Operating profit is also the highest for a first quarter since the first quarter of 2018.

This is analyzed as an effect of the smaller-than-expected decline in memory product prices and the addition of sales from Solidigm, which was incorporated as a subsidiary at the end of last year. An SK Hynix official said, "Some IT product consumption slowed down in the difficult business environment this year due to supply chain instability," adding, "However, we achieved good results by flexibly responding to changes in customer demand and focusing on profitability management."

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