SK Hynix cuts capital expenditure in half amid weak PC, smartphone demand and Washington’s export restrictions on China

South Korean chip maker SK Hynix Inc said it will cut its capital expenditure for next year by half after reporting a 60 per cent decline in third-quarter profit as memory chip demand plunged.

Hynix’s dramatic cut affirms growing pessimism about the outlook for electronics demand in the face of a potential recession as well as uncertainty over the extent of fallout from Washington’s campaign to smother China’s tech industry. It adds to downbeat forecasts that have come from other chip suppliers like Micron Technology Inc and Texas Instruments Inc.

Operating profit declined to 1.7 trillion won (US$1.2 billion) in the three months ended September, Hynix said on Wednesday, missing analyst estimates of a 2.5 trillion won profit. Revenue was 11 trillion won, missing the estimated 12.2 trillion won.

“SK Hynix diagnosed that the semiconductor memory industry is facing an unprecedented deterioration in market conditions,” the company wrote in its earnings announcement. “Shipments of PCs and smartphone manufacturers, which are major buyers of memory chips, have decreased.”

Prices of DRAM and NAND storage slumped at least 20 per cent on a quarterly basis, Hynix said. The company plans to cut production gradually, starting with less profitable products, though it still expects memory supply will exceed demand for the near term. Fellow memory makers Micron and Kioxia Holdings Corp. recently slashed their output plans in an effort to stabilise the market.

Hynix shares, which declined 29 per cent this year, were relatively flat in early trading in Seoul on Wednesday.