SK Hynix Continues to Have Excellent Performance Due to Super Booming of Memory Markets

Jul 26, 2017

SK Hynix recorded operating profit ratio of 46% in second quarter due to super booming of memory markets. Apple’s operating profit ratio in first quarter was 26.6%. SK Hynix replaced all of its previous best quarterly performance such as sales, operating profit, and net profit. Because positive trend of memory markets is likely to continue until next year, it is likely that SK Hynix’s new record of performance will also continue as well.
SK Hynix announced on the 25th it made $5.98 billion (6.6923 trillion KRW), $2.72 billion (3.0507 trillion KRW), and $2.20 billion (2.4685 trillion KRW) in sales, operating profit, and net profit respectively in this past second quarter. Compared to last quarter when it made its best performance, sales, operating profit, and net profit increased by 6%, 24%, and 30% respectively. Compared to second quarter of last year, sales, operating profit, and net profit increased by 7%, 574%, and 763% respectively. Its operating profit ratio of second quarter is 46% and it is 7% more than first quarter’s operating profit ratio (7%) which was its best quarterly operating profit ratio previously. SK Hynis’s second quarter performance is seen as ‘earning surprise’ that exceeds estimates made by markets.
“Reason why memory markets are having stable growth unlike our concerns is because roles of memory semiconductors are becoming more important.” said President Lee Seok-hee of SK Hynix.
It is likely that new records of performance will continue until next year. While number of demands has increased greatly due to increase in amount of introduction of DRAM into servers and mobile devices, upward trend of supplies is limited. Technologies have been developed so much that it is difficult to make memories even smaller, and it is expected that lack of supplies will continue due to increase in amount of investments. Although amount of supplies of NAND flash memories is likely to increase certain amount due to increase in investments towards 3D products, it seems that steady demands such as increase in amount of introduction of DRAM into mobile devices and servers# and strong prices will continue.
“We predict that bit growth rate of DRAM in 2018 will be around early-end of 20%.” said Director Kim Seok of SK Hynix DRAM Marketing Group at a conference call right after announcement of performance of 2nd quarter.
Bit growth rate indicates trend of shipment growth of memory based on an unit of bit. Bit growth rate of early-end of 20% is a value that is really low. SK Hynix’s competitors such as Micron are estimating that this value will be lower than 20% for the first time ever.
Looking at past examples, entire DRAM industries made operating losses in the following year when bit growth rate surpasses 50%. However when the value is below 40%, entire DRAM industries made operating profits. According to a market research company called IC Insights, bit growth has been in 20% range since 2012. Value of products goes up whenever amount of supply is low and there are many people who are trying to buy these products. This is one of reasons why DRAM manufacturers have consistently been making huge profits for past few years.
DRAM takes at least 70% of SK Hynix’s sales. When SK Hynix, which is the number 2 business in DRAM markets, estimated bit growth rate of DRAM in 2018 to be in the early-end of 20%, experts also analyzed that SK Hynix will also be making steady performance in 2018.
“Because competitors that can greatly increase output of DRAMs lack spaces for cleanroom and has been investing into 3D NAND, this year’s yearly increase rate of DRAM supply will be lower than increase rate of demands.” said President Lee Seok-hee of SK Hynix who oversees businesses and management support. “However amount of lack of supplies will ease slowly starting from second half of this year.”
It is likely that lack of supply of NAND flash will ease starting from 4th quarter of this year due to extension of 3D product lines done by major companies. SK Hynix, which generally lacks competitive edge in NAND, is planning to increase its performance by mass-producing 72-layer NAND flash memories and increasing amount of shipment of SSD (Solid State Drive).
SK Hynix is also working to accelerate construction of its new factories. “We are currently looking to push forward timing of completion of DRAM factory in Wuxi, China and NAND flash factory in Cheongju from first half of 2019 to 4th quarter of next year.” said Department Head (Executive Director) Lee Myung-young of SK Hynix Financial Planning Headquarters. A representative for SK Hynix explained that a reason why SK Hynix is pushing forward timing of completion of these factories is not because it wants to increase new outputs but because it wants to recover output of memories that is being lost due to increase in number of steps, which is caused by technology upgrades.
Staff Reporter Han, Juyeop |

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