SK hynix bets on memory chip recovery through further cut in NAND production

The Korea Times

The Korea Times

Business

Wed, November 29, 2023 | 04:05

SK hynix bets on memory chip recovery through further cut in NAND production

Posted : 2023-07-26 14:29

Updated : 2023-07-26 18:35

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

By Park Jae-hyuk

SK hynix has decided to carry out an additional 5 to 10 percent reduction in its production of NAND flash memory this year, to further decrease its operating losses by focusing more on selling high bandwidth memory (HBM) chips, which are in high demand among generative artificial intelligence (AI) developers, the chipmaker said Wednesday.

The decision was made as improved demand for memory chips has mainly enabled the company to reduce its quarterly operating loss by 15 percent quarter-on-quarter to 2.88 trillion won ($2.3 billion) from 3.4 trillion won.

"NAND flash memory has higher inventory levels than DRAM and is also less profitable, so we've decided to further reduce the production," an SK hynix official said during Wednesday's conference call on its second-quarter earnings.

After it experienced its first quarterly operating loss in 10 years during the fourth quarter of last year, SK hynix cut semiconductor production, halving the size of its annual investment this year, compared to last year. The company expects its production of both DRAM and NAND flash memory to be decreased this year, despite the increased sales of those products during the second quarter.

The SK affiliate, however, plans to increase its investment next year, to maintain competitiveness, particularly in HBM technologies. According to Taiwanese market researcher TrendForce, the share of SK hynix in the global HBM market was estimated at 50 percent last year, while Samsung Electronics' was 40 percent and Micron Technology's was 10 percent.

"We will prioritize investments for increased production of HBM," the SK hynix official said. "Instead of increasing the overall capacity, we will focus on changing manufacturing procedures to continue the operation based on efficient capital expenditure."

With its plans to keep releasing next-generational HBM products and increase the sales of HBM3, DDR5 and LPDDR5, SK hynix said it will speed up performance improvements during the latter half.

"Having passed the trough in the first quarter, the memory semiconductor market is seen to have entered the recovery phase," SK hynix Chief Financial Officer Kim Woo-hyun said. "SK hynix will strive to prop up earnings through its technological competitiveness in high-end products."

However, it remains unclear when the company will begin to see profits again.

Regarding a rumor about the merger between Japan's Kioxia and Western Digital in the U.S., SK hynix said it is yet to have heard any specifics related to the consolidation of the world's second- and fourth-largest NAND flash memory makers. In 2018, SK hynix invested around 4 trillion won in Kioxia by participating in a consortium of companies from Korea, the U.S. and Japan.

In response to concerns that Washington's regulations may affect the company's operations in China, the chipmaker answered that it is talking with the two countries' government officials and stakeholders.

pjh@koreatimes.co.kr