The collapsed storage market brought SK hynix a record loss

The collapsed storage market brought SK hynix a record loss in ten years

After Samsung Electronics, the second largest South Korean manufacturer of memory chips, SK hynix, published a quarterly report. The company’s operating losses reached $1.4 billion, which updates the anti-record for the entire existence of this legal entity since 2012, and revenue fell by 38%. The company intends to halve investments and expects the market to recover in the second half of the year.

    Image source: SK hynix

Image source: SK hynix

Kim Woohyun, Chief Financial Officer of SK Hynix, as previously mentioned Reuters, reported the sharpest drop in memory prices since the fourth quarter of 2008, and believes the product inventories accumulated by market participants must have reached their highest level in history. Inventories peaked this quarter, but as new product production slows, they will continue to fall. In the second half of the year, the memory market should reach a state closer to equilibrium.

The company’s revenue fell 38% to $6.3 billion in the fourth quarter. Net losses reached $2.85 billion. Overall, the company’s 2022 operating income fell 44% to $5.7 billion, but revenue rose just 4% to $36.3 billion. However, net income at the end of the year was still down 75% to $1.95 billion.

In the current quarter, SK hynix has to lower the prices for its products. The company is the world’s second largest manufacturer of RAM chips. Last quarter, it took the company 46.1 weeks to sell a new batch of products, this quarter could drop to 39.9 weeks, according to outside analysts, but that’s still too much. A year ago, this number was measured in 10 weeks, and manufacturers will be forced to actively reduce memory performance.

Back in October, SK hynix announced plans to halve capital expenditures to more than $7.7 billion in 2023. In the near term, the company wants to focus its resources on more advanced memory chips in preparation for a market recovery in 2024. Keep in mind that larger competitor Samsung Electronics won’t scale back its investments this year. In the second half of the year, as expected by SK hynix, growth in memory demand will be supported by the recovery of the Chinese economy and the arrival of new models of mobile devices. At the same time, such dynamics will not allow year-round physical growth in production volumes of both NAND memory and DRAM memory. In the first quarter, RAM production is to be reduced by a double-digit percentage.

Myoungsoo Park, Head of RAM Marketing at SK hynix, said the following about the state of the server memory market: “Our customers see the conditions for higher demand compared to the previous year. This is an opportunity we cannot afford to miss.”

About the author

Dylan Harris

Dylan Harris is fascinated by tests and reviews of computer hardware.

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