Operating Loss of 1.7012 Trillion KRW in Q4 Last Year
Investment This Year Reduced by More Than Half Compared to Previous Year
[Asia Economy Reporter Kim Pyeonghwa] SK Hynix experienced an extreme semiconductor winter and turned to a loss in the fourth quarter of last year for the first time in 10 years. SK Hynix plans to focus on expanding high value-added products, expecting the market to recover from the second half of the year. This year, investment will be reduced by more than half according to the existing plan, but investment in high value-added technologies will continue.
SK Hynix announced on the 1st that it recorded an operating loss of 1.7012 trillion KRW in the fourth quarter of last year on a consolidated basis. It was the first quarterly loss in more than 10 years since the third quarter of 2012. Sales also decreased by 38% compared to the same period last year, recording 7.6986 trillion KRW.
Last year, operating profit was 7.0066 trillion KRW, down 44% from the previous year. The operating profit margin was 16%, down 13 percentage points from the previous year. Last year's sales increased by 4% to 44.6481 trillion KRW, while net profit decreased by 75% to 2.4389 trillion KRW.
SK Hynix increased the supply of high-capacity DRAM products centered on the server and PC markets last year. In the growing sectors of artificial intelligence (AI), big data, and cloud customers, sales of high value-added products such as the latest DRAM standards Double Data Rate (DDR)5 and High Bandwidth Memory (HBM) were expanded. In particular, by increasing customers for data center solid-state drive (SSD) products, sales quadrupled compared to the previous year.
However, from the second half of last year, memory demand decreased and product prices fell sharply, leading to a decline in operating profit. SK Hynix also announced plans to minimize damage by reducing investment and costs and focusing on high-growth markets amid high uncertainty in the management environment.
As announced in the earnings release in October last year, SK Hynix will reduce investment by more than 50% compared to the previous year (19 trillion KRW) this year. Investment in mass production of high value-added core products such as DDR5, LPDDR5, and HBM3, as well as future growth, will continue.
SK Hynix forecasted that the sluggish market conditions will continue until the first half of the year but improve from the second half. The basis for this prediction is that the memory industry is not increasing supply due to reduced investment and production cuts, so the increased inventory in the market will peak in the first half and then decrease. Additionally, it is expected that market demand could rebound if IT companies increase their usage of memory at lower prices.
Kim Woo-hyun, Vice President and Chief Financial Officer (CFO) of SK Hynix, said, “We are paying attention as Intel recently released a new central processing unit (CPU) that applies DDR5, and new server memory demand based on AI may arise.” He added, “Since we have secured world-class technology in data center DDR5 and 176-layer NAND-based enterprise SSDs, we expect to achieve a quick turnaround when the market rebounds.”
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