Operating Income Increases 240% QoQ
SK hynix Inc. announced on April 23 financial results for its first quarter 2020 ended on March 31, 2020. The consolidated revenue of first quarter 2020 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 percent and net margin 9 percent.
Despite abrupt changes of external business conditions due to COVID-19, the company's first quarter revenue and operating income increased by 4 percent and 239 percent quarter-over-quarter (QoQ), 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 percent QoQ and DRAM average selling price increased by 3 percent QoQ.
For NAND Flash, the favorable demand of server solid state drives (SSDs) led to 12 percent increase of bit shipments and 7 percent increase of average selling price QoQ, respectively.
Regarding future global memory semiconductor market, SK hynix sees unprecedented uncertainties upon general market forecast.
It said 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 company 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 said it will seek to fortify its fundamental competitiveness and prepare itself for further demand fluctuation in the future.
SK hynix said it will maintain its previously announced investment plan which is notably decreased year-over-year (YoY). The company will fully 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, SK hynix will proactively respond to rapidly increasing demand for high-capacity server modules larger than 64 Gigabytes (GB), 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 the second half of this year 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 the second quarter of this year. Additionally, SK hynix will expand sales proportion of SSD products which already reached 40 percent among its NAND Flash sales in the first quarter, and diversify its portfolio with PCIe SSDs for data centers to improve profitability.
SK hynix announced that the company 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 (TF) since the pandemic erupted in the middle of January, which also contributed to normal operations of the production sites.
Cha Jin-seok, vice president and head of finance (CFO) at SK hynix, 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.”