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SK Hynix Expects Unstable Chip Demand

South Korean chipmaker SK Hynix Inc. warned on Thursday about a continued instability on chip demand. While limits on global expansion, if extended, is expected to weigh on production, sales, and product development across the industry.

There a lot of uncertainties about the outlook for supply and prices for servers. Chief financial officer (CFO) of the company Cha Jin-Seok shares his views.

While international demand for smartphones is likely to fall at a sharper rate this year than the previous year, the semiconductor firm said it was optimistic about demand for servers and PCs.

As more people stay at home in self-isolation, SK Hynix sees higher demand for online education, video streaming, and e-commerce.

The group generated a 41% slump in quarterly operating profit. Although it surpassed forecasts by a huge margin, as server demand due to COVID-19-driven shift to working from home partly offset the decline in the smartphone sector.

Operating profit stood at KRW 800 billion ($649 million) in the January-March period, beating estimates of KRW 474 billion. But the number still ended considerably below 2019’s operating profit of KRW 1.4 trillion.  

Cha said the biggest factor to their demand forecast is the stabilization of COVID-19. And the recovery timing of global economic activity. The CFO added that if the economic recession continues, they would not be able to rule out a potential slowdown in memory demand for servers.

Weaker South Korean Won Provided Tailwind for SK Hynix

The world’s second-largest memory chipmaker also expects delivery of DRAM chips. Smartphones, PCs, and servers, use them to remain flat in the current quarter compared to the last quarter.

Its forecast is lower than the market expected. SK Hynix will see a bigger impact from the coronavirus impact on mobile phones, despite robust server demand, analyst Park Sung-soon stated.

The chipmaker’s rivals outside the country, which recently released positive first-quarter earnings, have also taken a cautious stance on the current outlook.

Texas Instruments Inc.’s current-quarter earnings estimate ended significantly lower than Wall Street forecasts on Tuesday, while Taiwan Semiconductor Manufacturing Co. Ltd. revised down its full-year revenue outlook.

SK Hynix’s revenue inched up 6% to KRW 7.2 trillion in the first quarter.

The South Korean won, which hit its lowest level since 2009 in mid-March, supported local exporters such as Samsung and SK Hynix. It raised the value of overseas revenue when repatriated.

Samsung Electronics Co. Ltd. also signaled earlier in April a forecast-beating operating profit for the January-March quarter.  



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