SK Hynix says business woes ‘unprecedented’, to chop funding | Enterprise and economic system

The South Korean chipmaker’s third-quarter revenue plummets 60% amid hovering inflation.

South Korean chipmaker SK Hynix says the reminiscence chip market is dealing with “unprecedented deterioration” as its third-quarter earnings fell 60% amid hovering inflation.

“Provide will proceed to outstrip demand at the moment,” the world’s second-largest reminiscence chip maker mentioned in a press release on Wednesday, pointing to decrease shipments of laptops and smartphones.

The corporate mentioned it plans to chop its investments subsequent yr by greater than 50% year-on-year.

The autumn in earnings comes as runaway inflation has harm demand for digital gadgets and the reminiscence chips that make them up.

SK Hynix’s working revenue fell to 1.66 trillion received ($1.16 billion) within the July-September quarter from 4.2 trillion received ($2.93 billion) a yr earlier . The end result was under analysts’ expectations of a revenue of $1.87 trillion ($1.31 billion), in line with Refinitiv SmartEstimate.

Costs for DRAM chips, utilized in gadgets and servers, fell about 20% within the third quarter from the second, SK Hynix mentioned. Costs for NAND Flash chips that serve the information storage market have fallen by greater than 20%.

Lackluster outcomes echo an even bigger rival Samsung Electronics’ third-quarter revenue decline and warnings from US counterpart Micron Know-how Inc a couple of sharp drop in PC and smartphone gross sales.

Chipmakers had seen a surge in post-pandemic demand till early this yr, which created a scarcity of sure chips and disrupted the manufacturing of autos and varied digital gadgets.

However demand for chips has weakened considerably in latest months as hovering inflation, rising rates of interest and a bleak financial outlook have led customers and companies to chop spending.

The worldwide smartphone market contracted 9% year-on-year in July-September, marking the worst third quarter since 2014, in line with analytics supplier Canalys.

DRAM chip costs are anticipated to say no additional within the present quarter as reminiscence chip corporations have misplaced bargaining energy with clients who stockpiled chips and at the moment are struggling to get rid of them as a result of weak market efficiency. demand, mentioned Wi Min-bok, an analyst at Daishin Securities.

With the reminiscence chip glut anticipated to final till the primary half of subsequent yr, SK Hynix joins chipmakers who’ve begun to chop provide and funding. Micron plans to scale back its capital expenditure by greater than 30% subsequent yr. TSMC additionally lowered its 2022 funding plan.

SK Hynix mentioned its funding in 2022 is anticipated to be within the “higher vary of 10-20 trillion received” ($7-14 billion).

Regardless of the present drop in demand for server reminiscence chips, SK Hynix foresees extra urge for food in the long run as large-scale information facilities proceed to take a position to fulfill progress in areas similar to intelligence. synthetic intelligence (AI), massive information and the metaverse.

Third-quarter income fell 7% year-on-year to 10.98 trillion received ($7.6 billion).

Shares of SK Hynix had been flat in early morning buying and selling, in opposition to a 0.3% rise within the broader market