SK Hynix profit more than doubles after strong server memory demand

South Korean memory chipmaker SK Hynix Inc. reported profit more than doubled over the last quarter after datacenter sales offset slowing consumer demand and memory prices fell less than was feared.

Operating profit increased to 2.86 trillion won ($2.3 billion) in the three months ended March, the Apple Inc. supplier said in a statement Wednesday. Sales rose 43% to 12.16 trillion won. The company fell shy of analyst estimates of 3.2 trillion won in profit after recording a one-time expense of 380 billion won to cover the cost of compensating a customer for “performance weakness” in some DRAM products it previously sold, it said in the the statement.

Hynix credited strong demand for computing products as a driver for its sales jump, echoing global chipmakers such as Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. that have seen sales buoyed by strong orders from enterprise clients. The memory maker pointed to weak demand from China’s mobile market as a challenge, underscoring concern about consumer demand. Smartphone shipments this year suffered their worst drop since the Covid-19 outbreak and PC sales also slowed.

“There are rising risks from the demand side of slowing PC and smartphone demand, soaring commodity prices following the Russia-Ukraine war, weakening consumer demand on interest rate hikes and the spread of Covid,” Nam Dae-jong, analyst at eBest Investment & Securities said. “At a time when the global macro economic situation is rapidly changing, chip prices could be stabilized if IT-related demand stays healthy. If not, prices would continue to be on a downside trend.”

Chipmakers Argue Inventory Build-Up Signals Increased Demand
Hynix forecast annual growth of around 30% in NAND shipments and the high teens percentages for DRAM. The company expects a slight decline in PC shipments, citing virus-related lockdowns affecting manufacturing. It sees weak consumer PC demand and solid sales for corporate and gaming computers. Hynix also expects China’s softer smartphone market demand to persist.

The broader memory chip industry has forecast a rebound in DRAM and NAND prices as early as the second quarter. Over the first three months of the year, prices of DRAM fell less than projections while NAND prices recovered quickly after a contamination issue reduced output from Japan’s Kioxia Holdings Corp. that tightened overall supply. But uncertainty remains as macroeconomic risks are rising and demand for personal gadgets wanes. Smartphone shipments this year suffered their worst drop since the Covid-19 outbreak and PC sales also slowed.

In addition to macroeconomic risks such as Russia’s invasion of Ukraine and soaring inflation, China’s Covid Zero policy is putting a strain on supply chains. Lockdowns and mass Covid-19 testing are slowing operations and logistics across major cities such as Shanghai and Zhengzhou, where iPhone assembler Foxconn Technology Group has facilities. Hynix has a DRAM manufacturing facility in Wuxi and recently acquired Intel Corp.’s NAND plant in Dalian.

“We are expecting a more complicated DRAM market situation for 2022,” said Kim Woon-ho, analyst at IBK Investment and Securities. “There is much anticipation that DRAM prices could rebound in the second quarter but we see a greater possibility that prices may go down.” Bloomberg