SK Hynix Inc became Asia’s second major semiconductor maker this earnings season to warn of slower growth in smartphone chip sales, but said this would be offset somewhat by robust demand for server and other high-end chips.

Increasing signs of a maturing global smartphone market have fueled expectations that last year’s boom in chip demand is moderating and so will earnings growth.

The South Korean chipmaker met market expectations with a 77 percent jump in first-quarter operating profit to 4.4 trillion won ($4 billion). That was just short of last quarter’s best-ever result, ending a run of four consecutive quarters of record profit.

Its shares were down 3 percent in afternoon trade while those of large rival Samsung Electronics Co Ltd lost 2.4 percent.

“SK Hynix’ first-quarter shipments fell much steeper than previous company guidance, which seems to have fanned concerns about slowing mobile demand,” said Song Myung-sup, analyst at HI Investment & Securities.

Worldwide smartphone shipment volumes shrank for the first time late last year, according to search provider Strategy Analytics, with high-end brands coming under increasing competition from the likes of low-cost Chinese vendor Xiaomi.

Taiwan Semiconductor Manufacturing Co Ltd also warned last week of softer smartphone demand, cutting its revenue target and sending shares of key client Apple and as well as other chip firms lower.

But SK Hynix, the world’s No. 2 memory chip maker, was quick to stress it also had areas of strong growth up its sleeve.

“Although overall growth in smartphone sales will stagnate, China’s big four smartphone firms are leading the accelerated adoption of high-capacity chips,” SK Hynix head of DRAM marketing Sean Kim told an earnings briefing.

“As for servers, North American internet data center firms as well as Chinese firms led by Baidu, Alibaba and Tencent are increasing investment,” he added.

Prices for DRAM chips, which help devices perform multiple tasks, have risen as servers, gaming PCs and cryptocurrency mining devices demand more firepower to process large amounts of streaming data.

SK Hynix said growth for server DRAM chips was expected to outpace the overall DRAM market for the next two to three years, adding that compared to other chipmakers, server DRAM accounts for a bigger portion of its revenue.

Addressing concerns that DRAM prices could start to flatten out or even drop, the company said the industry needed to ramp up production capacity of complex DRAM memory chips as currently supply was constrained by the technological difficulty of producing them.

Although prices for NAND chips, which provide long-term data storage, have fallen, SK Hynix said it did not expect supply to outstrip demand this year.

By: DocMemory
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