SK hynix reaffirms 50% cut in investments after $1.4 billion loss in Q4 2022

The Korea Times

The Korea Times

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Sun, October 1, 2023 | 05:36

Tech

SK hynix reaffirms 50% cut in investments after $1.4 billion loss in Q4 2022

Posted : 2023-02-01 14:57

Updated : 2023-02-01 18:30

Chipmaker suffers quarterly loss for first time in 10 years

By Park Jae-hyuk

SK hynix suffered its first quarterly operating loss in 10 years, reiterating that the size of its annual investment will be halved this year compared to last year.

During Wednesday's conference call on its fourth-quarter earnings, the chipmaker attributed its performance to falling global memory chip demand and declining product prices leading to its quarterly operating loss of 1.7 trillion won ($1.4 billion).

This is the first time that the company operated at a loss since it posted a 24 billion won operating loss during the third quarter of 2012.

Citing growing uncertainties in its business environment, SK hynix reaffirmed its plan to cut investments this year by more than 50 percent from last year's 19 trillion won, as it had said during a conference call last October on its third-quarter earnings.

Its conservative stance contrasts with Samsung Electronics which ruled out the possibility of reducing its chip output this year, despite a 97 percent year-on-year drop in its semiconductor business' operating profit.

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The nation's largest conglomerate said Tuesday that there will be no "artificial" production cut this year, although most securities analysts expect the company to seek a "natural" reduction in its production through redeployment of facilities and maintenance of production lines.

SK hynix, however, answered that it does not have any plans at this moment regarding any additional reductions in its investment.

"We will be ready to supply DDR5, HBM3 and 176-layer NAND flash-based products, in line with the growing demand from our customers this year," SK hynix Chief Financial Officer Kim Woo-hyun said.

The SK Group affiliate expects the downturn in the semiconductor market will continue throughout the first half of this year. However, it expressed optimism about a possible rebound in the second half.

"There could be a sharper-than-expected upturn next year," Kim said.

SK hynix's factory in Icheon, Gyeonggi Province / Courtesy of SK hynix

Securities analysts forecast that the market conditions in the first half will lead SK hynix to suffer a significant annual operating loss this year.

"Due to the falling average selling prices of DRAM and NAND, SK hynix will suffer a 6.5 trillion won operating loss this year," Mirae Asset Securities analyst Kim Young-gun said.

Despite the worsening outlook, SK hynix decided to pay bonuses equivalent to 820 percent of each employee's monthly base wage, in order to share its annual operating profit of 7 trillion won. The decision was made a few weeks after the chipmaker decided to pay productivity incentives equivalent to each employee's monthly base salary.

pjh@koreatimes.co.kr