(5th LD) SK hynix expects strong memory demand on server, mobile growth

SK hynix Inc., South Korea’s No. 2 chipmaker, said Friday it expected strong demand for memory chips this year on the back of growth in the server and mobile sectors after reporting robust fourth-quarter earnings amid the pandemic.

Its net income reached 1.76 trillion won (US$1.6 billion) during the October-December period, turning from a loss of 125.6 billion won a year earlier, the company said in a regulatory filing.

The world’s second-largest DRAM producer said its fourth-quarter operating profit more than quintupled to 965.9 billion won from a year ago. Revenue increased 15 percent on-year to 7.96 trillion won.

“Despite the decreased revenue due to the falling prices and the weak dollar, the company achieved an operating profit of 298 percent on-year by actively responding to the strong mobile demand from the third quarter,” SK hynix said.

In the fourth quarter, DRAM bit shipments increased by 11 percent from the previous quarter, but the average selling price decreased by 7 percent. NAND flash bit shipments rose 8 percent quarter-on-quarter, but the average selling price suffered an 8 percent decline.

This file photo, taken Oct. 20, 2020, shows the corporate logo of SK hynix Inc. at its plant in Icheon, 80 kilometers south of Seoul. (Yonhap)

Its operating profit stood at 5.01 trillion won last year, compared with 2.71 trillion won from the previous year. Annual sales rose 18.2 percent to 31.9 trillion won.

“Due to the global pandemic and the intensifying trade disputes last year, the memory market showed a sluggish trend,” said Noh Jong-won, head of the corporate center at SK hynix. “The company expanded its server market share based on its quality competitiveness, which resulted in an increase in the revenue and the operating profit by 18 percent and 84 percent, respectively, compared with the previous year.”

For this year’s DRAM market, SK hynix projected that demand for server products will increase by more than 30 percent this year due to investments in new data centers by global companies.

It also projected mobile DRAM demand growth to be above 20 percent this year on the back of increased 5G smartphone shipments. SK hynix estimated that the global 5G smartphone shipments double this year to 500 million units.

Overall, the company projected DRAM demand growth this year to be around 17 to 20 percent, and its bit growth to be in line with the market.

But in terms of market supply, the company expected the DRAM industry to see a limited increase.

For the NAND flash market, the company projected that the market trend will begin recovering in the second half of this year, adding that high inventory levels will be resolved during the first half of the year with strong demand for solid state drive (SSD) products.

SK hynix expected overall NAND demand growth to be in the low 30 percent range, and the company said it aims to outperform the market growth.

The company said it also targets to make a turnaround in its NAND business this year following its decision to acquire Intel Corp.’s non-volatile memory unit for $9 billion.

“We would have some cost increasing factors this year due to Intel’s NAND business acquisition, but we will try to speed up improving our profitability,” it said.

SK hynix also announced that it has signed a memorandum of understanding with the Chinese city of Dalian to strengthen its relationship with the city and seek new investment in the region. Dalian is where one of Intel’s NAND flash chip plants is located.

To cope with rising market demand, SK hynix said it will focus on selling more high-value-added DRAM products, such as HBM2E, following the rise of the high-performance computing (HPC) and artificial intelligence (AI) systems market.

For NAND, the company said it plans to diversify its products, such as pursuing customer certification for 128-layer solid state drives (SSDs) for servers.

To boost its technology leadership, SK hynix added it plans to raise cost competitiveness by producing the fourth-generation 10-nanometer (1anm) DRAM products and 176-layer 4D NAND flash products.

Meanwhile, SK hynix announced a per-share dividend of 1,170 won, giving more than 800 billion won in total to its shareholders.

The company also said it will establish an environment, social and governance (ESG) management committee to discuss new opportunities in this field. The company recently issued its first-ever green bond to support its environmental-friendly projects.

Shares in SK hynix fell 0.41 percent to close at 122,500 won on the Seoul bourse, outperforming the broader KOSPI’s 3.03 percent decline. Its fourth-quarter earnings results were released before the stock market opened.