This photo, taken on Oct. 20, 2020, shows South Korean chipmaker SK hynix Inc.’s plant in Icheon, south of Seoul. (Yonhap)
SEOUL, Nov. 4 (Korea Bizwire) — SK hynix Inc., South Korea’s second-largest chipmaker, on Wednesday reported estimate-beating third-quarter earnings on the back of a recovery in demand for mobile chips amid the pandemic.
Its net profit stood at 1.07 trillion won (US$950.4 million) in the third quarter of the year, up 117.5 percent from a year earlier, the company said in a regulatory filing.
Operating profit for the July-September period more than doubled to 1.29 trillion won compared with 472.6 billion won a year ago, while sales jumped 18.9 percent on-year to 8.12 trillion won.
SK hynix said increased purchases of DRAM consumer products by a “certain customer,” possibly referring to China’s Huawei Technologies Co., boosted its earnings.
Huawei aggressively procured semiconductors ahead of the U.S. export restrictions that were put in place on Sept. 15.
Its sharp increase in third-quarter earnings was also attributed to a base effect since the company suffered one of its worst performances last year due to an industrywide slump.
Compared with the second quarter, its operating profit plunged 33.2 percent, while sales fell 5.6 percent.
By sector, DRAM accounted for 74 percent of SK hynix’s revenue in the third quarter, down 5 percentage points from a year earlier, while the revenue portion of NAND flash reached 24 percent, up 4 percentage points from a year ago.
For DRAM, SK hynix said it “proactively responded” to increasing demand for mobile and graphics DRAM products.
“In spite of decreased server DRAM demand, the company’s DRAM bit shipment in the quarter still increased by 4 percent quarter-on-quarter,” SK hynix said.
“However, due to the unfavorable price of server DRAM and certain other DRAM products, the average selling price decreased by 7 percent quarter-on-quarter.”
SK hynix also saw increased NAND flash bit shipments in the third quarter due to strong sales in mobile products and solid state drives (SSDs) for new gaming consoles.
“The sales expansion boosted the NAND flash bit shipment by 9 percent quarter-on-quarter,” it said. “Still, the weakening price flow of the server products led to the decrease of the average selling price by 10 percent quarter-on-quarter.”
This photo provided by SK hynix shows the company’s NAND flash memory chips.
SK hynix said it expects a seasonal increase of mobile market demand to continue in the fourth quarter, as smartphone manufacturers intensify competition with the release of new smartphones, while PC market demand is estimated to remain strong as well.
Server demand is forecast to be more moderate compared to the first half, it added.
In the current quarter, SK hynix expected its DRAM bit growth to be up by a mid-single-digit percentage compared to the previous quarter, while that of NAND flash would grow by a low single-digit percentage.
Bit growth refers to the amount of memory produced and is considered a key barometer to gauge market demand.
For the next year, DRAM bit growth could reach up to 20 percent, according to SK hynix, adding that the industry may see a short supply after the second quarter of 2021 following this year’s conservative facility investment trend.
It expected NAND flash bit growth in the mid-30 percent range next year.
Regarding memory prices, SK hynix estimated DRAM prices to be weak through the fourth quarter but to be stabilized from the first quarter of 2021.
It added the NAND flash price drop is expected to continue through the fourth quarter but could make a rebound in the first half of next year.
SK hynix said it will try to expand sales of its 1Ynm low-power double data rate (LPDDR) 5 DRAM and increase its presence in the UFS-based multichip package (uMCP) market.
The company also vowed to make more sales of high-capacity server products and high bandwidth memory (HBM) products.
SK hynix said the market for the next-generation DDR5 chips is expected to expand from 2022, and the volume of such products could exceed that of DDR4 in 2023.
For NAND Flash, SK hynix said it aims to expand sales of 128-layer NAND flash products, which it began selling full-scale in the third quarter.
The company said its $9 billion acquisition of Intel Corp.’s NAND flash business will not affect its DRAM capital expenditure plans, though it will keep “prudent” investment policies due to the market situation.
Asked about getting U.S. approval to supply its chips to Huawei, the company said it has applied for a license and is waiting for the result.
Meanwhile, SK hynix announced it targets securing all of its power consumption generated by renewable energy by 2050 after it decided to join the RE100, a global initiative that is joined by the world’s leading businesses committed to 100 percent renewable electricity.
(Yonhap)
