SK hynix, the world's second-largest memory chip maker, is expected to report disappointing third-quarter earnings next week, analysts said Friday, marking a sharp departure from record-breaking performances for the past few years, amid a cyclical downturn of the global semiconductor industry. SK hynix's operating profit for the three months ending in September is estimated at 2.5 trillion won (US$1.73 billion), down 38.8 percent from a year earlier, according to FnGuide, a Seoul-based financial services company.

Many analysts in Seoul, however, paint a gloomier picture, forecasting that the chipmaker's operating profit will miss their estimates.

Analyst Kim Dong-won at KB Securities said the company's Q3 profit is estimated at 1.6 trillion won, down 61.3 percent quarter-on-quarter and down 61.1 percent year-on-year. The chipmaker could turn to a deficit in the fourth quarter, with an operating loss of 186.9 billion won, he said, due to an oversupply and falling memory chip prices.

Park Sung-soon, an analyst at CAPE Investment Securities, put the estimate even lower at 1.57 trillion won, as slowing demand is detected in all semiconductor applications and chip buyers are feeling heavy pressure from growing inventory levels.

"As SK hynix is expected to make a loss in the fourth quarter and into the second quarter of next year with falling DRAM prices, I expect it to respond to market changes by reducing supply," he said.

Wi Min-bok at Daishin Securities echoed the same view in his latest report, saying the chipmaker is likely to announce a plan to reduce capital spending and cut back on production during an earnings call, slated for Wednesday morning, in order to limit the downward pressure on memory chip prices.

But he also held a positive outlook, saying SK hynix and Samsung Electronics, the world's top two memory chip makers, could see improvement in their long-term profitability starting next year, amid supply restraints coming from the difficulties in making DRAM of more advanced process nodes, which the two firms excel at and will be increasingly in high demand.

"The chip industry has begun to adjust supply, following an announcement by Micron Technology that it would reduce investment and capacity," Wi said.

Late last month, Micron posted weak earnings for its fourth quarter of fiscal year 2022, with sales decreasing 19.7 percent on-year on slowing consumer demand amid high inflation in major economies.

It said it would cut capital spending by up to 30 percent and chip equipment spending up to 50 percent to slow supply growth in fiscal year 2023.

Micron is the world's third-largest DRAM maker with a 23.6 percent market share, trailing behind industry leader Samsung with 43.4 percent and runner-up SK hynix with 28.1 percent, according to global market researcher Omdia.

A highly cyclical chip industry has entered a downturn following a strong, pandemic-fueled boom for the past few years as demand soared for chips that power every electronic product from smartphones and computers to cars.

Earlier this month, Samsung Electronics projected its Q3 operating profit at 10.8 trillion won, down 31.7 percent from the year-ago period, with weakened consumer spending power leading to a cut in chip demand from electronics makers, as well as cloud computing and server companies.

SK hynix will announce its Q3 results Wednesday, a day prior to Samsung's Q3 earnings announcement. (Yonhap)

By: DocMemory
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