South Korean chipmaker SK hynix said on Oct. 24 that it posted an operating profit of 472.6 billion won ($404 million) in the July-September period, down by a whopping 93 percent from a year earlier.
The company attributed the profit drop to the falling price of DRAM chips. The third-quarter revenue came in at 6.8 trillion won, up 6 percent on-year.
The chipamaker said its all-out efforts to reduce DRAM production costs were not enough to offset the price drop of memory chips.
“DRAM prices remained weak during the third quarter, leading to a 16 percent drop on-quarter in the average selling price,” an official from the chip manufacturer said.
The price of DDR4 8Gb, a memory chip for PCs, stood at $2.94 in September, down more than 60 percent from a high of $8.19 a year earlier.
The company said it would take a conservative approach in investing in manufacturing facilities due to the weak demand and low chip prices.
“The firm invested 17 trillion won for capex last year, and the figure will likely decrease this year,” said an SK hynix executive during a conference call in the morning, adding “It will cut the amount of investment for new equipment by some 40 percent, compared to last year, due to geopolical risks and low demand in recent months.”
Instead of building new facilities, the company said it would try to utilize the existing facilities to produce items in demand.
The chipmaker is currently converting the DRAM production lines of its M10 FAB in Icheon, Gyeonggi Province, to roll out CMOS image sensors, and reducing the production capacity of planar NAND flash memory chips.
As a result, both DRAM and NAND flash capacity will decrease next year compared to this year, and the amount of investment is expected to shrink considerably next year as well, the company said.
SK hynix added it will continue to focus on nurturing businesses for high-density, high-value-added products, including DRAM chips with finer chip fabrication technology as well as 96-layer and 128-layer 3D NAND flash memory products.
By Kim Young-won (email@example.com)