SK hynix Q3 profit likely to plunge

By Kwak Yeon-soo

SK hynix, the world's second-largest memory chipmaker, is likely to report a 94.2 percent plunge in its third quarter operating profit amid sluggish demand, an industry report showed Friday.

According to the report by financial market tracker FnGuide, SK hynix is expected to post a 378.2 billion won ($316 million) third-quarter operating profit, compared with 6.47 trillion won a year ago.

Since late last year, SK Hynix has been hit by a continuing downturn in chip prices and demand.

Analysts cite the recent trade row between Seoul and Tokyo, and the long-running U.S.-China trade war, as key reasons for tumbling profits.

A DRAM DDR4 8 gigabyte memory chip cost $2.94 in September, down from $7.25 at the end of last year.

The price of NAND Flash chips, another flagship product, has also continued to decline. About 80 percent of the chipmaker's sales come from DRAM and the remaining 20 percent from NAND Flash.

The company said that demand for DRAM chips used in computers and mobile devices has started to fall as a result of the U.S.-China trade war, adding that production would be adjusted.

“We will cut DRAM production capacity starting in the fourth quarter due to a weak recovery in demand,” the company said after announcing its Q2 earnings.

Some analysts expected that the global chip industry would bottom out at the end of this year due to chipmakers' efforts to slash production and expand data centers.

“Demand centered on DRAMs is expected to pick up beginning in the fourth quarter; other semiconductor prices will also rise accordingly,” an IBK Securities analyst said.

In July, SK hynix reported a second-quarter operating profit of 637.6 billion won, down 89 percent from a year earlier, due to weak memory chip prices.