SK Hynix Needs to Balance Business Portfolio
Speculation is rife about the possibility of SK Hynix Inc. strengthening its system semiconductor business.
SK Hynix is expected to post 6.44 trillion won (US$5.49 billion) in sales and 822.80 billion won (US$701.39 million) in operating profit in the second quarter, according to market tracker FnGuide on June 19. The figures represent a drop of 37.94 percent and 85.24 percent, respectively, compared to the same period last year. Some say that SK Hynix’s operating profit will stand at some 700 billion won (US$596.51 million) in the second quarter, falling short of market expectations.
In particular, an increasing number of investment banks at home and abroad are recently expressing concerns that SK Hynix may post a loss in the fourth quarter. This is because demand for memory chips is not picking up due to the intensifying trade dispute between the United States and China. Recovery in demand could be further delayed due to the U.S. sanctions on China’s Huawei Technologies Co., a big customer for SK Hynix. Some experts also say that the normal market trend of “low demand in the first half and higher demand in the second half” may not appear this year.
Accordingly, some speculate that SK Hynix may attempt to transform its unbalanced business structure in the long term. Samsung Electronics, which leads the memory chip industry, is recently making an intensive investment in the system semiconductor sector.
SK Hynix is still taking first steps in the system semiconductor sector. The company spun off its foundry business unit and established SK Hynix System IC Inc. in 2017. The subsidiary produces CIS, one of image sensor products. It is expected to expand its business areas to artificial intelligence (AI), Internet of Things (IoT) and automotive memory chip in the future. In addition, SK Hynix is forecast to bolster its system semiconductor business by acquiring Magna Chip Semiconductor Corp., which runs a foundry business.
However, many expect that SK Hynix will focus more on the next-generation memory chip business than system semiconductors since its top priority project is to build a semiconductor cluster in Yongin. It is more effective to become the leading company in the memory semiconductor sector by securing next-generation product technologies. In fact, the company succeeded in developing the next-generation solid state drive (SSD) standard technology for the first time in the industry.