SK hynix announces 205% jump in Q2 earnings upon unusual COVID-19 demand

SK hynix, the world’s second-largest memory chip manufacturer, on Thursday reported a 205.3 percent on-year increase in its second-quarter operating profit, due to unusually high demand for server DRAMs amid the protracted COVID-19 impact.

The consolidated revenue of the chipmaker stood at 8.61 trillion won ($7.2 billion) during the April-June period, up 33.4 percent on-year, while operating profit amounted to 1.95 trillion won and net profit was 1.26 trillion won. Its operating margin was 23 percent and net margin posted 15 percent.

A sudden surge in demand for server memory chips and favorable prices in the second quarter led to such an earnings surprise, according to SK hynix. While DRAM demand for mobile products remained weak, the company managed to expand sales of DRAMs for servers and graphic products, the company explained during a conference call.

The continued rise in DRAM prices over the past five months also helped SK hynix.

According to market tracker DRAMeXchange, the fixed price of 8-Gigabit DDR4 soared 12.5 percent to $3.31 as of June from $2.94 in late March.

The NAND Flash business also picked up due to increased demand for SSD products that accounted for nearly half of the unit’s sales for the first time.

However, the chipmaker said it is expecting current uncertainties triggered by the COVID-19 outbreak would not fade away in the second half of the year.

Although there can be some favorable events on the demand side, such as scheduled launches of new 5G smartphones and gaming consoles that would help drive NAND flash sales, the prolonging impact of the pandemic and global trade dispute would continue to afflict the chip industry, the company forecast.

“SK hynix will flexibly cope with changes in the external business environment, and prepare the foundation for sustainable growth in the second half of the year,” said Cha Jin-seok, vice president and head of finance at the company.

“Due to the COVID-19 impact, concerns and expectations co-exist in the market,” Cha said. “A major change in the post-COVID-19 era includes greater significance and value of memory chips.”

After 2021, memory demand would continue growing at a steadier rate than this year, while shipments of NAND flash chips would surge by over 30 percent next year.

The company highlighted it will focus on profitability-oriented products in the coming months, while maintaining a conservative plan for capital expenditure and capacity operation.

In particular, the company will expand sales of the second-generation 10-nanometer DRAM products to improve its profitability in the next quarter, and increase its supplies of Low-Power DDR5 products for mobile customers.

SK hynix will further expand sales of high-capacity server products larger than 64 gigabytes, which will be the company’s major cash cow.

The company also aims to announce mass production of the third-generation 10-nm DRAM within the year.

By Song Su-hyun (song@heraldcorp.com)