SK hynix: Fiscal 1Q20 Financial Results

SK hynix Inc. announced financial results for its first quarter 2020 ended on March 31, 2020.

The consolidated revenue of 1FQ20 was 7.20 trillion won while the operating profit amounted to 800 billion won, and the net income 649 billion won. Operating margin for the quarter was 11% and net margin was 9%.

Despite abrupt changes of external business conditions due to Covid-19, first quarter revenue and operating income increased by 4% and 239% Q/Q respectively, driven by increased sales of server products, yield rates improvement, and cost reduction.

For DRAM, strong demand of server clients offset the weak mobile demand which declined due to both seasonal slowdown and the Covid-19 impact. As a result, the company’s DRAM bit shipments declined only by 4% Q/Q and DRAM ASP increased by 3% Q/Q.

For NAND flash, the favorable demand of server SSDs led to 12% increase of bit shipments and 7% increase of ASP Q/Q respectively.

Regarding future global memory semiconductor market, the firm sees unprecedented uncertainties upon general market forecast. It is expected that global smartphone sales will decline, but the demand for IT products and services based on social distancing trend will drive the growth of server memory demand in mid- to long-term. Nevertheless, the firm also explained that if Covid-19 pandemic is prolonged, it will lead to increased demand volatility of global market and might disrupt production activities.

The company will seek to fortify its fundamental competitiveness and prepare itself for further demand fluctuation in the future.

SK hynix will maintain its previously announced investment plan which is notably decreased Y/Y. It will commit itself to technology migration and the preparation of M16 FAB’s clean room planned for the end of this year. It will also continue shifting some of its DRAM capacity to CMOS image sensors, and transferring its existing NAND flash capacity to 3D NAND flash as planned.

For DRAM, the manufacturer will respond to rapidly increasing demand for high-capacity server modules larger than 64GB, and expand 1Ynm mobile DRAM sales in order to improve profitability. At the same time, the company will begin mass production of 1Znm DRAM products in 2CH20 and timely react to both GDDR6 and HBM2E markets, which are expected to begin full-fledged growth.

For NAND flash, the company will increase the sales portion of 96-layer NAND flash and start mass production of 128-layer products in 2FQ20.

Additionally, it will expand sales proportion of SSD products which already reached 40% among its NAND flash sales in 1FQ20, and diversify its portfolio with PCIe SSDs for data centers to improve profitability.

SK hynix announced that it was able to ensure its global production sites operated normally while adhering to each country and local government’s advices and regulations. The company also mentioned that it established Covid-19 task force since the pandemic erupted in the middle of January, which also contributed to normal operations of the production sites.

Jin-Seok Cha, VP and CFO, stated: “SK hynix will minimize potential risks caused by Covid-19, and set up future technology innovation and infrastructure to timely react to 5G and server-based growth momentum.”