SK Hynix is the second-largest memory chip producer in the world, so its quarterly earnings reports are constantly analyzed for industry trends. Unfortunately for SK Hynix, its Q4 2022 results reflected the overall downward spiral of the PC industry during the second half of 2022.
The South Korean company posted its first operating loss in over ten years (dating back to Q3 2012). The company’s poor quarter was compounded by lowered demand for memory chips and a significant drop in memory pricing in Q4. As a result, the company reported revenue of 7.699 trillion won ($6.267 billion), an operating loss of 1.701 trillion won ($1.384 billion), and a net loss of 3.524 trillion won ($2.868 billion). Operating profit plunged 44 percent for the whole year — despite revenue increasing by 4 percent compared to 2021.
“With uncertainties still lingering, we will continue to reduce investments and costs, while trying to minimize the impact of the downturn by prioritizing markets with high growth potential,” the company stated in a press release.
SK Hynix agrees with industry analysts that memory chip inventory will peak during the first half of 2023 as key players reduce production and investments to align with customer demand. However, the company added that it “forecasts market conditions to gradually improve into the latter part of the year… With the world’s best technologies for DDR5 for data centers and 176-layer NAND flash-based enterprise SSD, we expect to see a quick turnaround when the market bottoms out.”
There were already signs that SK Hynix would have a rough fourth quarter. In October 2022, the company announced that it would halve its capital expenditures (CapEx). Given the company’s 60 percent year-over-year drop in operating profit for Q3 2022 and the 44 percent overall drop reported today, this move is understandable. However, despite the CapEx cuts, SK Hynix remains committed to investing in “mainstream products,” including DDR5/LPDDR5 and HBM3.
SK Hynix didn’t elaborate on how its investment crunch will affect its $11 billion fab in South Korea, which is currently under construction. The fab was initially scheduled to open in 2025 but could be pushed back if the company’s hopeful H2 2023 rebound doesn’t happen.