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Earnings Results: SK Hynix adds to evidence that the chip glut is here to stay for a while

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SK Hynix Inc. added to concerns Wednesday that the semiconductor industry has entered a glut as the chip maker missed expectations for the quarter and forecast declining market demand out into 2023.

SK Hynix
000660,
+0.43%

shares rose 0.4% to 93,900 won in Seoul trading.

The South Korea-based memory chip maker company reported third-quarter earnings of 1,609 won ($1.14) per share, compared with 4,813 won ($3.41) in the year-ago period. All dollar amount are based on the current rate of about 1,410 won to the dollar
KRWUSD,
1.02
.

Revenue for the third quarter declined to 10.983 trillion won ($7.8 billion) from 11.805 trillion won ($8.35 billion) won in the year-ago period.

Analysts surveyed by FactSet expected 2,294 won per share on revenue of 11.81 billion won.

The company also said it expects to cut its own capital expenditures by more than half in 2023, after spending an estimated “high” of 10 trillion won, or just over $7 billion, in 2022.

Taiwan Semiconductor Manufacturing Co.
TSM,
-0.49%

also announced capacity cuts recently due to expectations of softer demand.

Opinion: Micron earnings suggest the chip downturn could be worse than Wall Street expects

At the beginning of the month, Micron Technology
MU,
-0.75%

reported “unprecedented” supply issues and analysts wondered if the market had hit a bottom.

Like SK Hynix, Micron specializes in DRAM, or dynamic random access memory, the type of memory commonly used in PCs and servers, and NAND chips, which are the flash memory chips used in smaller devices like smartphones and USB drives.

SK Hynix expects DRAM demand to fall by a low- to mid-single-digit percentage range in 2022, and down by low teens in 2023. For NAND, SK Hynix expects demand to fall by a single-digit percentage year over year in 2022, while demand is expected to dive by a mid-20% range in 2023.

SK Hynix said it expects PC shipments to decline by a mid-teen percentage in 2022, followed by a likely further correction in 2023. Mobile shipments are expected to decline by a high single-digit percentage in 2022. While server products are seeing “relatively healthy demand” for the year, the company expects a “corporate investment reduction and inventory correction due to macro uncertainties affecting 2H demand.”

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