SK hynix said on Oct. 24 that it would ‘significantly’ cut investment in facilities next year. Industry watchers say this appears to be an indication that the cold spell among suppliers will continue to next year.
“Our capex investment will go down significantly next year from this year as we assume a more conservative stance to prepare for the future,” said Cha Jin-seok, vice president at the firm during a conference call held shortly after SK hynix announced its third quarter earnings results.
This means that the firm won’t be increasing memory chips until the markets improve. But once the market begins to pick up, the firm will take the opportunity to immediately purchase the necessary equipment to up the production. Many chip makers have been engaging in such business practices to ward off risk.
In 2019, SK hynix poured a record 17 trillion won into facility investments. But on deteriorating market conditions, the company said early this year that it would continue to invest in infrastructure, but would be cutting investment in equipment by more than 40 percent.
With experts now predicting the company to invest a little more than 10 trillion won into facility investment this year, they believe there is the possibility of the volume going down even further to below the 10 trillion won threshold next year.
Despite such measures, the chip maker is forecasting a rosy future, as memory chip inventory is dwindling on the expanding demand. DRAM, in particular, has hit normal levels, along with NAND. It will be some time, however, SK hynix's NAND business turns to the black, mostly because its costs are higher than rivals such as Samsung Electronics.
On Monday, SK hynix said it posted 6.83 trillion won of sales, 472.6 billion won of operating profit and 495.5 billion won in net profit in the third quarter. Compared to first quarter of last year, its sales and operating profit decreased by 40% and 93% respectively.
On-quarter, sales fell 6%, while operating profit decreased 26%. The company explained that the declining operating profit was due to the less-than-satisfactory DRAM that was unable to offset the increased sales.
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