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The Korea Herald
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THE INVESTOR
March 29, 2024

Mobile & Internet

SK hynix to cut capital expenditure amid weak DRAM demand

  • PUBLISHED :January 24, 2019 - 14:53
  • UPDATED :January 24, 2019 - 15:06
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[THE INVESTOR] Despite posting record earnings last year, chipmaker SK hynix said on Jan. 24 that it will reduce capital investments in the face of demand slowdown in the global DRAM market.

“The company plans to reduce equipment investments by 40 percent in 2019, compared with last year,” an SK hynix executive said during a conference call after the firm’s fourth-quarter earnings results were announced in the morning.

SK hynix said, however, it plans to retain the initially planned investments for research and development, and the construction of its M16 plant in Ichoen, Gyeonggi Province. 


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The chip company, No. 2 DRAM maker in the world after Samsung Electronics, spent some 17 trillion won (US$150.60 billion) to construct its M15 plant and expand its existing plants in Wuxi, China. After facing a drastic downturn late last year, the Korean chip company has been tightening its belt.

In the fourth quarter, the chip unit of SK Group earned 4.43 trillion won, down 31.6 percent on-quarter. The firm, however, marked record annual revenue and operating profit, which respectively came in at 40.45 trillion won and 20.84 trillion won.

Some of the reasons behind the downward trend for the global chipmaker are said to be the sluggish demand in data server segment and slowing sales of mobile devices.

Global tech giants including Amazon, Facebook and Google, all of which operate large-scale data servers, have been slowing down their purchase of new DRAM chips due to high inventory levels.

Market watchers forecast the inventory issue could be solved soon as the global data server operators launch new cloud services during the second half.

“The top brass of the chipmaker met with partners like Facebook and Google during the CES trade show held early this month,” said an industry source, adding the firm is working hard behind the scenes to sign new supply deals with the tech giants.

The SK Group affiliate forecast that the overall shipment volume of DRAM would grow by around 10 percent this year, which is lower than 2018.

Reflecting the demand slowdown which started late last year, the stock price of SK hynix has slid for the past several months. The share price, which hit a low of 56,700 won on Jan. 4, rebounded to a high of 70,300 won in intraday trade after the fourth-quarter earnings announcement.

By Kim Young-won (wone0102@heraldcorp.com)

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