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© Reuters. FILE PHOTO: Reminiscence chips by South Korean semiconductor provider SK Hynix are seen on a circuit board of a pc on this illustration image taken February 25, 2022. REUTERS/Florence Lo/Illustration
By Joyce Lee and Heekyong Yang
SEOUL (Reuters) -South Korea’s SK Hynix Inc cautioned that the chip {industry} downturn, the worst in over a decade, will deepen additional within the subsequent few months because it posted a document quarterly working loss on Wednesday.
Market situations will steadily enhance later this yr as chipmakers minimize provide in response to the drop in international tech demand and shoppers purchase chips once more at low costs, mentioned SK Hynix, the world’s No.2 reminiscence chipmaker after Samsung Electronics (OTC:).
“The latest drop in reminiscence costs is the biggest because the fourth quarter of 2008 … industry-wide stock might be at an all-time excessive,” SK Hynix’s finance chief, Woohyun Kim, mentioned in an earnings name.
He expects stock ranges to peak throughout the first quarter earlier than steadily declining as chipmakers scale back manufacturing, bettering supply-and-demand situations within the second half.
SK Hynix flagged decrease chip costs within the present quarter.
Shares of the corporate rose as a lot as 5% on hopes of a restoration later in 2023, however confronted with a bleak near-term outlook, the good points fizzled out. The inventory was up 0.8% at 0345 GMT, according to the broader benchmark’s 0.8% rise.
For the fourth quarter ended December, SK Hynix swung to a worse-than-expected 1.7 trillion received ($1.38 billion) working loss, from 4.2 trillion received revenue a yr earlier. The quarterly loss is the most important since SK Group acquired Hynix in 2012.
Analysts had anticipated a 1.3 trillion received working loss, in accordance with Refinitiv SmartEstimate.
‘PRODUCTION ADJUSTMENTS NEEDED’
The worldwide expertise {industry} has been battling a pointy and sudden downturn in demand since late 2022, as corporations minimize spending on tech services and products whereas shoppers spend much less on discretionary items amid surging inflation.
To dump piling stock, chipmakers appeared to promote chips at modest costs within the fourth quarter, resulting in a depreciation within the asset worth of NAND Flash chip stock.
However promoting has not been straightforward with shoppers, cautious resulting from financial uncertainty, opting to make use of their very own stock, analysts mentioned.
Knowledge as of the fourth quarter reveals it took 46.1 weeks for SK Hynix’s merchandise to be offered from time of manufacturing, mentioned Nam Dae-jong, analyst at eBest Funding & Securities.
Though that is anticipated to drop to 39.9 weeks within the first quarter, “it is nonetheless an excessive amount of… lively manufacturing changes are wanted”, Nam mentioned. It was under 10 weeks a yr earlier.
SK Hynix mentioned in October it plans to slash its 2023 funding by greater than half versus 2022, after warning of an “unprecedented deterioration” in reminiscence chip demand.
On its earnings name, SK Hynix mentioned it’s going to focus its assets on superior chips to organize for a market upturn in 2024. It had a free money move deficit of 4.23 trillion received as of end-2022.
In distinction, Samsung (KS:) Electronics has mentioned it has no plans to chop funding regardless of reporting a 97% plunge in its chip working revenue for the October-December interval.
“Hynix does not have as a lot cash as Samsung. Its free money move is at an enormous deficit, and… borrowing has elevated,” mentioned Eo Kyu-jin, analyst at DB Monetary Funding. “It is a obligatory alternative to chop capex.”
($1 = 1,232.4700 received)
