Q2 earnings briefing... Sales exceeded 10 trillion won in 3 years
Ratio of 128-layer NAND exceeds 50%… Improved profitability
Acquired Intel at the end of the year, gained a competitive edge in 176 l
SK Hynix is about to turn to profitable in its 'N and Flash' business, as the profitability of NAND flash business is rapidly improving due to an increase in the demand and supply of high-performance products. Moreover, with a possible achievement of an annual surplus, attention is paid to whether SK Hynix, the second largest in the DRAM market, will leap forward using DRAM and NAND flash as its two wings. SK Hynix said in a Q2 earnings briefing on the 27th, “Profitability is rapidly accelerating as the proportion of 128-layer NAND flashes exceeded 50% in the second quarter. The NAND business is expected to turn to profitable in the third quarter.”
SK Hynix also added that it expects annual surplus in the NAND flash business. The company said, “Considering the competitiveness of 128-layer and 176-layer NAND, the business is expected to remain profitable even after next year, and we will see a huge synergy when the Intel NAND Flash business, scheduled to be acquired by the end of this year, is added.”
NAND flash was SK Hynix's weakness. DRAM ranks first with a market share of around 28%, while NAND flash ranks fourth in the industry with 11-12%. NAND profitability fell as it failed to lead the market while competing with other companies in the mid-rank. According to the analysis of securities firms, SK Hynix's NAND business generated a loss for 11 consecutive quarters from the fourth quarter of 2018 to the second quarter of this year.
However, it is understood that SK Hynix is aiming for an opportunity for reverse by releasing high-performance products such as 128-layer and 176-layer NAND flash in a timely manner, with the rapidly increasing demand for NAND flash due to the revitalization of digital economy after COVID-19. SK Hynix said, “The annual demand growth rate for NAND flash is projected be in the mid-to-late 30% range, higher than originally expected. We will start mass production for the next-generation product, 176-layer NAND, at the end of this year as planned, and by the end of the year, the proportion of 128-layer and 176-layer is expected to approach 80%.”
The 176-layer NAND flash product has the highest number of stacks in the industry. NAND flash is a memory semiconductor used to store data in information technology (IT) devices such as smartphones, PCs, and servers, and storage. Stacking is a technology to increase data capacity by vertically stacking circuits like an apartment or building, and it is a measure of how much data can be stored, which is crucial for NAND flash technology.SK Hynix mass-produced the world's first 128-layer NAND at the end of 2019 and announced that it developed the world's second 176-layer NAND after Micron of the United States at the end of last year, showing that it was strengthening its technological competitiveness. This implies that the results are leading to performance.
The rebounding of NAND flash business is expected to grow in parallel with DRAM. SK Hynix has surpassed 10 trillion won in sales in the second quarter thanks to the boom in semiconductors, first time in three years since 2018, which was considered a boom period for memory whose sales exceeded 10 trillion won. Operating profit also reached 2.69 trillion won, up 103% from the first quarter and 38.3% from the same period last year. SK Hynix predicted that the semiconductor demand would continue to increase in the second half of the season, which is the peak, with continuous growth of the earnings.
Vice President of SK Hynix Jong-won Roh said, “The memory market will lead from general consumer products in the first half to corporate demand (data centers, etc.) in the second half. Demands for high-capacity DRAM and NAND flash are rapidly recovering in line with the spread of 5G smartphone supply after COVID-19 and the launch of new central processing units (CPUs) in the second half of the year, and this increase is expected to continue until next year.”
Reporter Geon-il Yoon email@example.com