Apple memory chip supplier SK Hynix posts record US$1.4 billion loss amid chip market slump

The world’s No 2 DRAM maker is cutting output and capex, as it awaits a recovery in the second half of the year

Crosstown South Korean rival Samsung said it will not cut capex, a move that further weighs on memory prices

Reading Time:2 minutes

Published: 10:06am, 1 Feb 2023Updated: 8:53pm, 1 Feb 2023

South Korean chip maker SK Hynix reported its biggest quarterly loss on record, owing to plunging prices in memory chips, and stuck to plans to halve capital spending this year.

Slammed by prices of memory that have fallen by more than 50 per cent since their 2022 peak, Hynix is cutting output and capex as it awaits a recovery in the second half of the year. Bit growth of Hynix’s DRAM and NAND chips will decelerate this quarter, it said. Sector-wide inventory levels will continue to grow, but should peak in the six months to June, the company said.

Hynix, which supplies memory to Apple, reported an operating loss of 1.7 trillion won (US$1.4 billion) for the three months ended in December on a 38 per cent drop in revenue. The average of analyst expectations was for a 1.1 trillion won loss.

“With uncertainties still lingering, we will continue to reduce investments and costs, while trying to minimize the impact of the downturn by prioritising markets with high growth potential,” the company said in a statement on Wednesday, adding that it will focus on raising equipment efficiency.

The US$160 billion memory industry is reeling from a large imbalance between supply and demand. Memory makers are sitting on three to four months’ worth of inventory, while clients have yet to use up their stockpiles. But despite citing a “significant” deterioration in the business environment, Hynix’s crosstown rival Samsung Electronics said on Tuesday that it planned to keep chip capital expenditure this year at the same level as in 2022, in a move that further weighs on prices.

“Hynix’s soaring inventory caused a decline in its memory prices that exceeded market expectations,” said Nam Dae-jong, analyst at eBest. Its inventory will remain high for the rest of the year, Nam said, adding the company needed to actively adjust capacity.

Unlike Hynix and Micron Technology, which have slashed spending, memory chip leader Samsung continues to invest in new capacity, as it eyes medium- to long-term demand. Samsung’s capex plans triggered a sell-off of the two South Korean chip makers’ shares, as investors had expected the world’s biggest memory chip vendor to slash capex and tighten memory supply.

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x