SK Hynix, which recorded sluggish performance in the first half of this year, is seeing its operating results rebound sharply in the latter half. SK Hynix is highly likely to record an "earnings surprise" in the third and fourth quarters of this year, exceeding market consensus, primarily thanks to a hike in DRAM prices.
Market analysts said that SK Hynix' robust performance would likely to continue in 2017 and 2018 as the supply of DRAMs is limited and the demand for 3D NAND flash memory chips is fast expanding.
The company enjoyed its heyday over the past two years. The oligopolistic structure of the memory chip market is cemented, led by three dominant players, namely Samsung Electronics, SK Hynix, and Micron Technology. The size of the mobile market has also grown rapidly, clearing the way for SK Hynix to enjoy strong growth.
In the fourth quarter of 2014, SK Hynix achieved a record-high operating profit of 1.66 trillion won. The situation, however, reversed thereafter, as the smartphone market slumped and the Chinese economy slowed down, leading to a decline in prices for its flagship item, DRAMs.
Park Sung-wook, CEO of SK Hynix, said on Oct. 10, "The current crisis may engulf us if we fail to cope well with it. However, if we respond wisely, we can turn it into a great opportunity."
He made the remarks in a message sent out to all employees to mark the company's 33rd anniversary and the 10th anniversary of SK Hynix’s entry into the Chinese market.
Park added, "I feel great pride in the accomplishments made by our employees who contributed to developing this company into a world-class semiconductor player after overcoming so many crises." After being inaugurated as Hyundai Electronics in 1983, SK Hynix underwent a number of ups and downs. It was placed under a debt workout program in 2001 and suffered more than a 5 trillion won deficit in 2008.
SK Hynix, however, is now firing on all cylinders, with quarterly operating profit exceeding 1 trillion won during the period from 2014 to 2015. After stagnating in the first half of this year due to a decline in DRAM prices, the company has rebounded in the latter half. The company’s consolidated second quarter revenue amounted to 3.94 trillion won rising 8 percent from the first quarter thanks to increased product shipments beyond expectation, courtesy of memory demand recovery.
While operating profit was 453 billion won declining 19 percent due to a continuous drop in average selling prices compared to the previous quarter. Net income for the quarter was 286 billion won after a loss in foreign exchange due to a drop in average exchange rates, income tax expenses. Operating margin was 11 percent and net margin was 7 percent.
Quarter over quarter, DRAM bit shipments increased by 18 percent, owing to strong demand from the mobile sector and demand recovery in the computing segment but the average selling price declined by 11 percent. For NAND Flash, the bit shipments sharply rose by 52 percent due to increased demand from the mobile and SSD markets as well as a base effect of the first quarter.
However, the average selling price decreased by 11 percent on account of price reduction in NAND solution devices and an increment in the sales portion of TLC products whose unit prices are relatively low.
SK Hynix will expand 2Znm DRAM to respond to the market demand in the latter half. The 2Znm has been not only expanded in the Company’s computing DRAM production but also applied to the mobile DRAM and the usage rate of which in DDR4 and LPDDR4 will be gradually increased. As a result, the portion of 2Znm production is expected to be up to 40 percent of the total DRAM around the end of the year.
For NAND Flash, SK Hynix is planning to expand its proportion of 1Ynm process in planar NAND and 36-layer 3D NAND, which has been started to ship to the mobile segment. The company will start to ship 48-layer 3D NAND Flash after completing the development within the latter half of 2016.
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