Falling prey to downward spirals in the prices of memory chips, SK Hynix saw its 1st quarter operating profits more than halved quarter-on-quarter.
The world’s second largest memory chip maker said today that it logged an operating profit of 1.37 trillion won, 69% down from a quarter ago, in the first quarter ended on March 31 on consolidated revenue of 6.77 trillion won, also down 32% quarter-on-quarter.
The steep and consistent price drop dealt heavy blows with its revenues and operating profits.
Seasonality-adjusted weak demand also played havocs, driving down DRAM bit shipments by 8% quarter-on-quarter.
Much of the sluggish shipments were blamed on seasonal slowdown and conservative server computer purchase among enterprises and cloud service providers.
Average selling prices of DRAM chips declined by 27% quarter-on-quarter.
The culprit was true of NAND flash memory chips.
Average selling prices of NAND flash memory chips by 32% quarter-on-quarter, mainly due to rapid inventory build-ups across channels and intensifying competition among suppliers.
NAND chip bit shipments also dropped by 6% quarter-on-quarter, driven by weak demand.
Looking forward, SK Hynix predicts that market situations will be mixed for a while, as uncertainty on memory chip demand and hope for 5G-led demand recovery coexist for a while.
SK Hynix will revert to a well-balanced product mix-up strategy as well as rapid ramp-up to finer design circuitry process.
Combined, SK Hyix bets that it will not only enable the chip maker to stay less vulnerable to price plunges, but also undercut competitors on profitability.
For example, it plans to produce more of DRAM chips with its 1st generation of high 10nanometer circuitry technology called as 1Xnm, while starting to sell a second generation of low 10nm circuitry products called 1Ynm in the second half of 2019.
By product, SK Hynix plans to expand the supply of the high-density 64GB modules in line with the launch of a new server chipset that supports high-density DRAM.
When it comes to NAND Flash, SK Hynix has stopped producing the 36-layer and 48-layer 3D NAND, initial 3D products which are relatively higher in cost, and will increase the proportion of 72-layer products as a percentage of total production.
It also plans to strengthen its position in the SSD and mobile market in the second half, starting to sell its 96-Layer 4D NAND.
Considering the demand situation, the pace of the ramp-up of the new M15 FAB in Cheongju, Korea, will be slower than planned. As a result, SK Hynix’s NAND wafer input this year is expected to decrease more than 10% compared to last year.