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SK Hynix Misses Fourth Quarter Expectations as China Slowdown Drags

SK Hynix Misses Fourth Quarter Expectations as China Slowdown Drags

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by January 27, 2019 News Updates
SK Hynix Misses Fourth Quarter Expectations as China Slowdown Drags

The world’s second-biggest memory chipmaker, South Korea’s SK Hynix, posted fourth-quarter profit well below market expectations on Thursday as US-China trade frictions and China’s slowing economy dragged on semiconductor prices.

It was the Samsung Electronics rival and Apple supplier’s first profit decline in two years, but its shares rebounded from recent falls due to hopes the global chip market is nearing the bottom, analysts said.

“Sharp declines in Chinese demand for electronic products are materialising and Hynix’s results are showing that,” said Song Myung-sup, a senior analyst at HI Investment & Securities.

SK Hynix said its October-December profit was KRW 4.4 trillion ($3.9 billion), below a KRW 5.1 trillion average forecast drawn from 26 analysts, according to Refinitiv data.

“Growing macroeconomic uncertainties led to conservative purchasing behaviour by server customers and a slowdown in smartphone sales,” the company said in its presentation slides for the results.

SK Hynix plans to cut its investment in equipment purchases by 40 percent this year versus a year earlier, due to China’s economic slowdown and the US-China trade “situation”, a company executive told the earnings call.

Market leader Samsung earlier this month estimated a 29 percent drop in quarterly profit, blaming weak chip demand. This followed Apple’s cut to its quarterly sales forecast citing slowing iPhone sales in China.

Taiwan Semiconductor Manufacturing Co (TSMC) joined in last week, forecasting its sharpest quarterly revenue fall in a decade.

China’s economy cooled in the fourth quarter under pressure from faltering domestic demand and US tariffs, weighing on profits for firms ranging from tech giants to big carmakers.

On the upside, SK Hynix said demand for server DRAM chips, which help devices perform multiple tasks, should recover in the second half as data centres reduced inventory from currently high levels.

SK Hynix said its DRAM chip shipments fell by 2 percent in the fourth quarter, while its selling prices slid 11 percent from a quarter ago.

For NAND flash chips, which provide long-term data storage, shipments rose by 10 percent but the average selling price fell by 21 percent, the company said.

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