SK Hynix’s dependence on China is continuing to increase. In the wake of trade disputes between the United States and China, the ratio of the company’s sales in China to its total sales increased by 7.6 percentage points in 2019. With the ongoing spread of COVID-19 poised to significantly affect the Chinese IT market, much attention is being paid to how the dependence will affect SK Hynix.
The company’s sales in China totaled 12,570.2 billion won in 2019, down 25 percent from a year earlier. In spite of the decline, the ratio rose from 38.8 percent to 46.4 percent last year. For reference, it was 33.4 percent in 2017.
The increasing ratio has to do with an increasing semiconductor demand in China and the trade disputes. At present, Chinese smartphone manufacturers are increasing their global market share at a rapid pace.
In the mobile DRAM chip market, the combined share of Samsung Electronics, SK Hynix and Micron Technology currently amounts to 95 percent, which means their sales in China increase as Chinese smartphone manufacturers’ sales increase. After the United States’ trade restrictions following the disputes, Micron Technology’s exports to Huawei dropped, resulting in more sales of the South Korean companies in the Chinese market.
The South Korean companies’ high dependence on China can backfire in that the spread of the coronavirus will shrink the Chinese smartphone market. The smartphone demand in China is estimated to fall 20 percent and 10 percent year on year in the first and second quarters of this year, respectively.
Fortunately for SK Hynix though, the company’s dependence on DRAM products is continuing to decline. Specifically, its DRAM sales totaled 20,292.6 billion won and the sales dependence fell from 79.9 percent to 75 percent last year. At the same time, the ratio of its other sales including foundry and image sensor sales rose from 1.4 percent to 5.5 percent to beef up its product portfolio.