SK Hynix sees uncertain memory market but posts 6% revenue gain

Memory giant SK Hynix posted a strong first quarter partly because COVID-19 caused more online work, boosting DRAM needs for servers. Pictured: the "happiness" main gate for company headquarters in Icheon, South Korea. (SK Hynix)

South Korean memory chipmaker SK Hynix posted a 6.3% increase in revenue for the first quarter as COVID-19 increased online activities and demand for IT products.

However, the company said in a statement it sees “unprecedented uncertainties” regarding the future of the global memory semiconductor market. Global smartphone sales are expected to decline, the company said, but demand for IT products and servers based on the social distancing trend will drive server memory growth in the mid- to long-term

Revenues for the quarter were $5.9 billion, even as net income plunged to $528 million, a fall by 41% from a year earlier. The decline still beat market expectations, however.

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SK Hynix is the third largest chipmaker in the world by revenues behind Intel in the top position and Samsung Electronics in second place. In 2019, SK Hynix posted revenues of nearly $27 billion, a greater than 30s% decline from a year earlier due largely to the global downturn in memory revenues from both supply and demand impacts.

The South Korean company makes DRAM and NAND as well as CMOS image sensors for customers globally. Shares are traded on the Korea Exchange.

In a statement, the company said that despite abrupt external business changes with COVID-19, its revenues jumped by 4% over the previous quarter, while operating income increase 239%. That was due to “increased sales of server products, yield rates improvement and cost reduction.”

With DRAM, strong server demand offset weak mobile demand due to COVID-19 and a seasonal impact. During the first quarter the company’s DRAM bit shipments decline by 4% over the previous quarter, but the average selling price increased by 3%.

With NAND, demand for server sold state drives (SSDs) created a 12% increase in shipments and a 7% increase in the average selling price, compared to the prior quarter. Overall, SSD products made up 40% of NAND Flash sales in the first quarter.

SK Hynix said it is continuing to shift some DRAM capacity to CMOS image sensors and transferring existing NAND Flash capacity to 3D NAND Flash as planned.

 Even as social distancing has increased the demand for online and the IT products and services and server memory demand, the company said that if the pandemic is prolonged “it will lead to increased demand volatility…and might disrupt production activities.”

“SK Hynix will minimize potential risks caused by COVID-19 and set up future technology innovation and infrastructure to timely react to 5G and server-based growth momentum,” said Jin-Seok Cha, head of finance, in a statement.

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