Chip maker SK Hynix posts 95 per cent quarterly profit plunge

SEOUL, Jan 31 — The world’s second-largest memory chip maker, South Korea’s SK Hynix, posted a 95 per cent quarterly profit plunge today as it suffers from a long-running lull in the global market.

The East Asian country’s chip manufacturers — led by behemoth Samsung Electronics — have enjoyed record profits in recent years as prices for their products soared.

SK Hynix supplies chips to companies from US giant Apple to China’s Huawei but demand began to decline and supply increase after manufacturers invested billions in new factories.

Operating profit for SK Hynix dropped 95 per cent to 236 billion won (RM810 million) year on year in the period October to December, the company said in a statement.

The firm also recorded a net loss of 118 billion won, while sales fell 30 per cent to 6.9 trillion won.

For the full year 2019, net profit was 2.01 trillion won, down 87 per cent on the previous year.

The manufacturer has been strained by a trade war between China and the United States and caught in a diplomatic row between Seoul and Tokyo over wartime history, with Japan in July imposing tough restrictions on exports crucial to South Korean tech giants.

“The increase in inventory burden and conservative purchasing policies on the side of customers led to a slowdown in demand as well as price falls,” the chip maker said.

The company will “carry out more prudent production and investment strategies, as complexities and uncertainties still remain much higher than in the past,” it added.

Weakening overseas demand for memory chips — one of South Korea’s key trade items — is bad news for the country’s export-driven economy.

Rival Samsung faces similar challenges and has reported a 38 per cent fall in net profit for the October-December period.

But Avril Wu, an analyst at the Taipei-based market tracker TrendForce, told AFP that there will be an improvement in the company’s profitability in the first quarter of this year.

“We expect both DRAM and NAND Flash average selling price to rise, while the cost of goods sold has no reason to increase as far as we know,” she added.

Shares in SK Hynix closed down 0.53 per cent in Seoul. — AFP