SK Hynix improves Q1 operating profit by 66 percent due to consumer products demand

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In this Wednesday, July 25, 2018, photo, a man walks by the logo of SK Hynix Inc. in front of its office in Seongnam, South Korea. South Korean chipmaker SK Hynix said on Thursday, July 26, 2018, its quarterly net profit surged 75 percent to a record high. (AP Photo/Ahn Young-joon)

SK Hynix grew its first-quarter operating profit by 66 percent year-over-year thanks to strong demand for new PCs and smartphones.

Typically, the corporation experiences declining sales during the post-holiday period. But the digitalization boom that followed the COVID-19 outbreak has kept its revenues at a high level.

Although the global semiconductor shortage makes forecasting difficult, the South Korean firm anticipates robust sales through 2021 and 2022.

SK Hynix Strong Q1 Returns

In the quarter ending March 31, SK Hynix brought in ₩8.49 trillion ($7.6 billion) in revenue with an operating profit of ₩1.32 trillion ($1.19 billion). Besides beating its intake from the same time last year, it also topped its Q4 2020 results. It brought in ₩7.96 trillion ($7.12 billion) with operating income of ₩966 billion ($865.2 million) in the December period.

As SK Hynix is a memory chip supplier for Apple, its strong returns in Q1 make sense.

The American Big Tech firm has done brisk business since the pandemic began as it prompted the world to embrace remote work, learning, and recreation solutions. The iPhone maker attracted lots of new and returning customers the world over with its first 5G-enabled handsets. Consequently, it stocked up on components to address intense interest in its offerings.

The world’s second-largest memory module manufacturer also noted that it managed to increase its chip yields, which bolstered its income. That enhanced operational efficiency helped it overcome the loss of Huawei, formally one of its largest clients, last fall.

Positive Outlook for 2021 and 2022

SK Hynix explained that it has a positive outlook for 2021 and 2022 and the reasons for its optimism.

The corporation expects its IT sector customers to burn through their inventory quickly, which will bring in more orders. Though it derives most of its income from selling dynamic memory, it anticipates DRAM and NAND demand rising in the near term.

Moreover, the company is debuting its 128GB multi-chip package (MCP) products in Q2 and ramping up production of its 1Znm DRAM later this year. It also intends to complete development of its 1Anm products, made using extreme ultraviolet lithography (EUV) technology, in 2021.

By reinforcing and expanding its leading-edge portfolio, the firm is setting itself up for consistent long-term success.

In addition, SK Hynix is taking steps to ensure it has the manufacturing infrastructure necessary to achieve its goals. Bloomberg noted it is spending some of its 2022 capex now to acquire fabrication equipment with long lead times. It also received approval from Seoul to build a $106.5 billion factory cluster in its home country earlier this month.

As a result, it should have sufficient capacity to meet the demand for its current next and products soon.

Finally, the U.S. government approved SK Hynix’s $9 billion purchase of Intel’s NAND and storage business last month. Though the transaction still needs a green light from Chinese authorities, Washington’s acceptance of the deal is a good sign.

Based on current conditions, the global semiconductor industry is unlikely to stabilize in the near term. Shortages, international trade conflicts, and large-scale merger and acquisition activity will continue disrupting the sector going forward. But while the future is uncertain, SK Hynix’s expansion into an even more significant component provider seems inevitable.

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