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(3rd LD) SK hynix expects solid demand in H2 after upbeat Q2 earnings

All News 15:43 July 23, 2020

(ATTN: ADDS stock price at bottom, photo)
By Joo Kyung-don

SEOUL, July 23 (Yonhap) -- SK hynix Inc., South Korea's second-largest chipmaker, announced on Thursday that it expects solid chip demand in the second half of the year following its strong second-quarter performance on the back of robust demand for server chips amid the novel coronavirus pandemic.

Its net profit more than doubled to reach 1.26 trillion won (US$1.1 billion) in the second quarter of the year from a net profit of 537 billion won a year earlier, the company said in a regulatory filing.

Operating profit for the April-June period more than tripled to 1.94 trillion won. Sales increased 33.4 percent on-year to 8.6 trillion won over the cited period.

Its operating margin reached 23 percent, up 13 percentage points from a year earlier.

Compared with the first quarter, its operating profit surged 143.2 percent, while sales jumped 19.6 percent.

This undated image shows the corporate logo of South Korean chipmaker SK hynix Inc. (PHOTO NOT FOR SALE) (Yonhap)

SK hynix said strong demand of server chips from cloud service companies, caused by the pandemic-driven stay-at-home trend, pushed up its bottom line.

"The surging demand for server memory maintained favorable memory price, while numerous factors, including the increase of the main products' yield rate, led to cost reduction," it said.

For DRAM chips, SK hynix said it managed to expand sales of both server and graphics products although weak demand of mobile customers continued.

"Both DRAM bit shipments and average selling price increased by 2 percent and 15 percent on-quarter, respectively," the company said.

For NAND flash memory, SK hynix said its solid state drive (SSD) products led the growth. For the first time, its SSD business accounted for nearly half of its NAND flash business, the company added.

Its NAND flash bit shipment and average selling price increased by 5 percent and 8 percent on-quarter, respectively.

This photo provided by SK hynix Inc. on July 2, 2020, shows the company's high-speed DRAM, HBM2E. (PHOTO NOT FOR SALE) (Yonhap)

SK hynix projected that global uncertainties, caused by the pandemic and trade disputes among major economies, will continue in the second half of the year.

But 5G smartphones and new video gaming consoles that are scheduled to be launched later this year will stimulate growth.

"For the third quarter, we expect the DRAM bit growth to be flat compared to the previous quarter, while that of NAND flash will increase by a high single-digit percentage," the company said in a conference call. "The company's annual bit shipment is expected to increase by a mid-10 percent figure, while that of NAND flash is to rise by more than 40 percent as we previously projected."

SK hynix said price adjustment appears to be "unavoidable" in the second half of the year, noting that the average selling price of its products could be lower, though it will not undermine the growth of memory demand in the long term.

SK hynix said memory demand is anticipated to show more firm, stable growth next year. It expected bit growth of DRAM and NAND flash to be around 20 percent and 30 percent in 2021, respectively.

This photo provided by SK hynix Inc. shows the company's NAND flash chips. (PHOTO NOT FOR SALE) (Yonhap)

SK hynix added it will maintain the "conservative plan" for capital expenditures.

For the DRAM business, SK hynix said it will expand mobile DRAM sales using its 1Ynm technology and timely supply low-power double data rate (LPDDR) DRAM products. It will also focus on increasing sales of high-capacity server products larger than 64 gigabytes and push for the full-scale mass-production of 1Znm DRAM products.

For the NAND flash business, SK hynix said it will try to diversify its customer portfolio to boost its competitiveness in the server products business, in addition to responding to mobile and gaming console demand.

The company said it plans to sell its 128-layer NAND flash products in the third quarter at the earliest.

Despite the stronger than expected second quarter earnings, shares in SK hynix declined 0.96 percent to 82,400 won on the Seoul bourse, underperforming the broader KOSPI's 0.56 percent drop. Its earnings result was released before the stock market closed.▲

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