South Korean chipmaker SK Hynix Inc mentioned the reminiscence chip market is dealing with an “unprecedented deterioration”, as its third-quarter revenue tumbled 60% amid a surge in inflation, lacking expectations.
“Provide will proceed to exceed demand in the interim,” the world’s second-biggest reminiscence chip maker mentioned in a press release, pointing to a fall in pocket book and smartphone shipments.
The corporate mentioned it plans cut back its funding subsequent 12 months by greater than 50% on-year.
The revenue fall got here as red-hot inflation harm demand for digital units and the reminiscence chips that go in them.
SK Hynix’s working revenue fell to 1.66 trillion gained ($1.16 billion) within the July-September quarter, from 4.2 trillion gained a 12 months earlier. The consequence was under analysts’ expectations of a 1.87 trillion gained revenue, in keeping with Refinitiv SmartEstimate.
Costs of DRAM chips, utilized in units and servers, fell round 20% within the third quarter from the second, SK Hynix mentioned. Costs of NAND Flash chips that serve the info storage market fell greater than 20%.
The lacklustre outcomes echo greater rival Samsung Electronics‘ third-quarter earnings hunch and U.S. peer Micron Know-how Inc’s warnings of a pointy decline in PCs and smartphones gross sales.
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CHIPMAKERS BRACE FOR IMPACT
Chipmakers had loved a robust post-pandemic demand surge till early this 12 months that created a scarcity of sure chips and disrupted manufacturing of automobiles and varied digital units.
However chip demand has turned sharply weaker in current months, as hovering inflation, rising rates of interest and gloomy financial outlook have led customers and companies to tighten their spending.
The worldwide smartphone market contracted 9% on-year in July-September, marking the worst third-quarter since 2014, in keeping with evaluation supplier Canalys.
DRAM chip costs are anticipated to fall additional within the present quarter as reminiscence chip firms have misplaced their bargaining energy with prospects who’ve stockpiled chips and now battle to clear them as a consequence of weak demand, mentioned Wi Min-bok, analyst at Daishin Securities.
With the reminiscence chip glut seen lasting till the primary half of subsequent 12 months, SK Hynix joins chipmakers which have begun curbing provide and funding. Micron plans to chop investments by greater than 30% subsequent 12 months; TSMC has additionally lower its 2022 funding plan.
SK Hynix mentioned its 2022 funding is predicted to be on the “higher vary of 10-20 trillion gained”.
Regardless of the present drop in demand for server reminiscence chips, SK Hynix forecast extra urge for food in the long run as hyperscale information centres proceed their funding to satisfy development in industries similar to synthetic intelligence (AI), huge information and the metaverse.
Third-quarter income fell 7% on-year to 10.98 trillion gained.
SK Hynix shares had been flat in early morning commerce, versus a 0.3% rise within the wider market.
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