SK Hynix sees robust chip demand for rest of year after strong Q2 sales

SK Hynix Inc., the world’s second-largest memory chipmaker, on Tuesday posted its highest quarterly profit and sales in nearly three years on strong demand for chips used in PCs and other electronic gadgets.

The South Korea-based chipmaker also forecast that robust chip demand will continue for the rest of the year, driven by data servers, 5G-enabled smartphones and devices using artificial intelligence.

“Chip demand is growing at a faster rate than expected. We expect memory demand to continue into the second half, while enterprise applications are set to overtake consumer products in use of memory chips next year,” Noh Jong-won, the company’s chief financial officer, told a conference call with analysts.

Operating profit in the three months to June was 2.69 trillion won ($2.33 billion), up 38% from a year ago, SK Hynix said in a regulatory filing. The second-quarter reading is the highest since the fourth quarter of 2018, when it reported a profit of 4.4 trillion won.

Revenue increased 20% on-year to 10.32 trillion won, rising above the 10 trillion won mark for the first time since the third quarter of 2018.

Higher memory prices on tight supply of DRAM chips and a faster-than-expected recovery in NAND chips, including the 128-layer NAND flash, have also boosted its profit margin, it said.

The chipmaker’s operating profit margin stood at 26% in the second quarter, up 11 percentage points from the previous quarter.

UPBEAT OUTLOOK

SK Hynix said it expects memory demand to remain strong in the second half with global mobile phone makers such as Apple Inc. and Samsung Electronics Co. slated to unveil new smartphones, including the latest in the iPhone and Galaxy lineups.

Orders for DRAM and NAND chips for solid-state drives (SSDs) in particular will rise in the second half ahead of Intel Corp.’s launch next year of its next-generation central processing unit (CPU), according to SK Hynix.

The Korean chipmaker plans to increase the output and sales of 64 GB and higher-capacity DRAM and 10-nanometer fourth-generation 1a DRAM products using the extreme ultraviolet (EUV) equipment in the latter half of this year.

The company said it aims to turn around its loss-making NAND flash business in the third quarter with increased sales of more profitable 128-layer products for mobile solutions and enterprise SSDs. It also plans to mass produce its higher-stacked 176-layer NAND flash later this year.

In the second quarter, the 128-layer NAND accounted for more than 50% of its total NAND product sales. By the end of this year, SK Hynix expects the portion of its 128-layer and 176-layer NAND products to be close to 80%.

CHINA’S APPROVAL OF INTEL DEAL LIKELY BY YEAR-END

While maintaining its leadership in DRAM, SK Hynix said it will strive to improve profitability in its NAND business going forward.

The company said its $9 billion acquisition of Intel's NAND memory chip business will receive necessary approval by all countries concerned by the end of this year.

In October last year, it said it was acquiring Intel’s NAND memory chip business for $9 billion, a deal that is expected to secure the company's position as the world’s second-largest player in the NAND market.

In March of this year, US antitrust regulators approved the deal, which is also under review by SK Hynix’s other major export markets.

China is the only remaining country among eight nations to which SK Hynix filed for antitrust reviews. The chipmaker expects to get China’s approval by the end of this year.

Write to Su-Bin Lee at lsb@hankyung.com
In-Soo Nam edited this article.