OP Plunges 33% QoQ
SK hynix Inc. posted 8.129 trillion won in consolidated revenue, 1.3 trillion won in operating profit and 1.078 trillion won in net income in the third quarter 2020 ended on Sept. 30, 2020, the company announced on Nov. 4. Operating margin for the quarter was 16% and net margin 13%.
Despite the company saw the recovery of mobile DRAM demand in the quarter, both the revenue and operating profit decreased by 6% and 33% quarter-over-quarter (QoQ), respectively, as the server DRAM and SSD demands weakened, and the overall semiconductor memory price flow turned downwards in the quarter.
For DRAM, SK hynix proactively responded to rising demands for mobile and graphics DRAM, and the expansion of consumer electronics DRAM demand as well. As a result, in spite of decreased server DRAM demand, the Company’s DRAM bit shipment in the quarter still increased by 4% QoQ. However, due to the unfavorable price of server DRAM and other certain DRAM products, the average selling price decreased by 7% QoQ.
For NAND Flash, sales expanded in both the mobile segment and SSDs for new gaming consoles; sales expansion boosted the NAND Flash bit shipment by 9% QoQ. Still, the weakening price flow of the server products led to the decrease of average selling price by 10% QoQ.
SK hynix expects seasonal increase of mobile market demand to continue in the fourth quarter, while anticipates strong PC market demand to maintain as well.
For DRAM, SK hynix will focus on responding to the mobile demands by expanding sales of 1Ynm LPDDR5 DRAM, and also increase its presence in UFS-based multichip package (uMCP) market, which combines DRAM with high-density NAND Flash. At the same time, the Company will increase its sales proportion of high-capacity server products with more than 64 Gigabytes (GB) capacity, and maximize the sales of high bandwidth memory (HBM) products in order to enhance its position in server DRAM market based on competitive product quality.
For NAND Flash, SK hynix will react to stable mobile demand in the market, while improving the profitability by expanding sales proportion of 128-layer NAND Flash products which the company began full-scale selling in the third quarter.
In a quarterly earnings conference call, Lee Seok-hee, CEO of SK hynix participated and explained the company’s acquisition of Intel NAND memory and storage business, and its plan to create social value via environmental, social, and corporate governance (ESG) management. Lee stressed, “SK hynix acquired Intel’s NAND memory and storage business in order to swiftly secure leading SSD technology and diversify product portfolio. With this acquisition the company seeks to establish a balanced business structure between DRAM and NAND Flash. The expected synergy effects from this acquisition will bring both economic and social values to not only the global ICT industry including our customers and partners, but also all the stakeholders including our shareholders, local communities, and the members of SK hynix.”
Lee further stated that “The dramatic climate change is the problem which impacts not only companies’ economic value but also the survival of human race. SK hynix noticed the severity of the current global climate change, and decided to join RE100 in order to proactively respond to this crisis. The company aims to secure all of its power consumption generated by renewable energy by 2050. On the other hand, it is notable that the general SSDs and low power consumption SSDs consume 50% and 94% less power than HDDs respectively. Consequently, if all HDD storages in global data centers are replaced by low power consumption SSDs, we can reduce 41 million tons of carbon dioxide emission. This will lead to approximately more than 4.2 trillion won value of social value. By accelerating the transition of the storages into SSDs, SK hynix will contribute to the reduction of carbon dioxide emission.”