SK Hynix sees solid demand for server chips offsetting weaker mobile, PC demand

A perspective of the logo of SK Hynix at its headquarters in Seongnam, South Korea, April 25, 2016. REUTERS/Kim Hong-Ji

SEOUL, April 27 (Reuters) – South Korean chipmaker SK Hynix Inc (000660.KS) reported it expects reliable desire for server chips to offset weaker development from own desktops and cellular phones, soon after its 1st-quarter gain extra than doubled from a 12 months in the past.

The world’s next-major memory chipmaker on Wednesday posted a 116% leap in Q1 earnings, supported by good demand from customers from server clients, even though it a little missed market place anticipations due mainly to one-off high-quality control expenses.

“Companies’ IT paying out ideas are stable and even mounting somewhat despite outside the house uncertainties that arose in the very first quarter,” explained Kevin Noh, SK Hynix’s chief marketing officer.

“And given some facts centre building postponement last year thanks to COVID, we expect server chip desire to be solid in 2022,” he claimed.

China’s COVID-19 lockdown was the most important threat driving weaker chip desire in cellular and private computers, the corporation claimed, but it predicted a pick-up in the 2nd 50 percent as brands ramp up product or service launches prior to the calendar year-conclusion procuring time.

Shares in SK Hynix have fallen about 15% due to the fact the begin of the year, as have these of rivals these types of as Samsung Electronics (005930.KS) and Micron Technology Inc (MU.O), on considerations about the influence of China’s COVID-19 lockdown and inflationary pressures on element shortages and purchaser need.

SK Hynix shares have been buying and selling down 2.7% on Wednesday in an overall market place (.KS11) down 1.1%.

Global smartphone shipments fell 11% all through January-March amid unfavourable financial ailments and sluggish seasonal demand from customers, analysis business Canalys explained.

Delivery delays in chip machines brought about by component shortages have hobbled potential expansions and upgrades throughout the chip production marketplace.

But SK Hynix, by bringing gear in during the calendar year, expects to be approximately in line with its original capability progress target by year-conclude and will attempt to fulfill consumer demand from customers by improving upon its yield price, Noh claimed.

Functioning gain rose to 2.9 trillion won ($2.3 billion) in the January-March quarter, its optimum first-quarter income given that 2018. This was up from 1.3 trillion received a yr previously but underneath analysts’ predicted revenue of 3.1 trillion received, in accordance to Refinitiv SmartEstimate.

Irrespective of a slowdown in cellular desire, a disruption in February at a rival NAND flash chip plant owned by Japan’s Kioxia and Western Digital (WDC.O) due to contamination of raw components led to solid shipments, analysts stated. browse additional

SK Hynix explained it experienced conservatively booked 380 billion gained ($301 million) as a 1-off price tag to compensate customers of DRAM chips made in mid-2020 which have been uncovered to have quality issues when made use of intensely for around a calendar year.

The company stated it expects the memory chip industry to carry on to increase this yr on server need, as the memory chip industry’s volatility and cyclicality seems to have lessened.

Prospects have learned to lock in volume at year-end and create up basic safety inventory all through the earlier two years’ source disruptions, executives claimed on an earnings phone. SK Hynix, meanwhile, has focused on profitability by earning less products and solutions that are sensitive to clients’ business fluctuations, they added.

Profits climbed 43% on-12 months to 12.2 trillion received.

($1 = 1,261.0000 gained)

Reporting by Joyce Lee Enhancing by Richard Pullin

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