SK Hynix Expected to Recover Performance... Industry Passing Bottom Phase

[Asia Economy Reporter Changhwan Lee] The outlook for SK Hynix, which faces concerns over poor performance due to weak demand for memory semiconductors, is improving.

On the 2nd, Korea Investment & Securities forecasted that SK Hynix's third-quarter sales will be 7.8 trillion KRW and operating profit will be 1.3 trillion KRW, slightly exceeding the recent market consensus.

Due to the impact of the novel coronavirus disease (COVID-19), demand and price forecasts for memory semiconductors were downgraded from the end of the first quarter until recently, lowering SK Hynix's earnings forecast consensus. However, with recent increases in demand and price forecasts, earnings outlooks are expected to start being revised upward.

The securities firm analyzed that demand for memory semiconductors has recently begun to recover. Demand, which hit a low point in July and August, has entered a recovery phase. The recovery in demand started as expected from mobile.

Since semiconductor sales to Huawei were halted on the 15th of last month, concerns about a gap in demand for mobile memory semiconductors have been offset by other smartphone manufacturers' component inventory accumulation, leading to a recovery in demand despite the Huawei order gap.

Researcher Jongwoo Yoo of Korea Investment & Securities said, "As mobile recovers, orders from server customers will also gradually recover," adding, "As the perception spreads that the fourth quarter will be the last period of price decline, orders from server DRAM customers will increase."

Hi Investment & Securities also forecasted SK Hynix's third-quarter sales and operating profit to be 8 trillion KRW and 1.3 trillion KRW, respectively. Considering recent severe shipment slumps, this is evaluated as very favorable performance. They judged that some positive effects from Huawei's emergency orders since late August have been partially reflected.

Operating profit in the fourth quarter is expected to decrease by 39% compared to the third quarter, recording 794.6 billion KRW, but signs of industry downturn easing are expected as the decline in average selling price (ASP) slows and orders from some major customers recover.

Furthermore, semiconductor inventories of customers are expected to fall to normal levels by the end of this year and early next year, and due to the emergence of new server platforms and the base effect of smartphone shipments, demand growth next year is expected to be very favorable.