SK Hynix ramps up spending to meet chip shortage
The world's number two memory Chipmaker posts 66% jump in Q1 profit
South Korea’s SK Hynix (000660.KS), the world’s No.2 memory chip maker, said on Wednesday it will bring forward planned capital spending but warned supply increases from the investment will come only next year, pointing to a prolonged global semiconductor shortage.
Chipmakers around the world from Intel Corp (INTC.O) to Taiwan Semiconductor Manufacturing Co (TSMC) (2330.TW) have pledged billions of dollars of investment to ease the chip shortage but many have cautioned that tight supplies will likely continue into next year.
The shortage, exacerbated by a fire at a chip factory in Japan and a storm in Texas, has affected carmakers, in particular, forcing many automakers to halt production.
“We expect our (chip) inventory to remain tight throughout the year and become even tighter in the second half of this year,” SK Hynix CFO Kevin Noh told analysts.
Noh said demand from computer server operators, its key clients, will increase from the second quarter, tightening overall demand for memory chips.
The South Korean company is reviewing various options to help alleviate the global chip shortage problem, he said.
SK Hynix, which spent 9.9 trillion won ($8.9 billion) on capex in 2020, did not specify how much of its planned 2022 capital spending would be brought forward to the second half of 2021.
Earlier this month, TSMC unveiled a plan to invest $100 billion over the next three years to increase capacity, days after Intel announced a $20 billion plan to expand its capacity.
SK Hynix posted a 66% jump in first-quarter profit on continued stay-at-home demand for devices and forecast strong demand for chips over the rest of 2021.
“The company expects customers’ chip inventory to decrease quickly as current stronger-than-expected demand growth in the broader IT market continues,” it said in a statement.
The chipmaker, which counts Apple Inc (AAPL.O) among its customers, reported an operating profit of 1.3 trillion won ($1.17 billion) in January-March, up from 800 billion won a year earlier.
That was below a Refinitiv Smartestimate of a 1.4 trillion won profit, drawn from 20 analysts. The Smartestimate gives more weight to consistently accurate analysts.
First-quarter revenue rose 18% on-year to 8.5 trillion won, thanks to strong sales of smartphones and personal computers during the pandemic.
Shipments of personal computers in the first quarter jumped 55% on-year, a sharp contrast from a decline in the PC market of about 2% a year over the past decade, according to NH Investment & Securities.
Shares in SK Hynix fell 2.9%, lagging a 0.8% drop in the broader market (.KS11), after its quarterly profit slightly missed analysts’ expectations.
It competes with bigger rival Samsung Electronics Co (005930.KS), which will report quarterly earnings on Thursday.