As demand for PCs and smartphones slows, so does demand for 3D NAND and DRAM memory. As a result, companies like SK Hynix are suffering from declining revenues and significantly reduced profits.According to reports via Reuters When Nikkei Asia, to balance the books, SK Hynix plans to halve its capital spending next year and focus on manufacturing more expensive types of memory. The company also plans to assess the future of its Chinese fabs.
SK Hynix Cuts Capital Expenditures Due to Falling Key Earnings
Like other semiconductor companies, memory makers believe demand for their chips will languish for several quarters and supply will outpace demand. To that end, SK Hynix will cut his CapEx investment next year by more than 50% year-over-year. The company has not disclosed how much it will spend on new fabs and tools in 2023, but only says it will be “up to 10 to 20 trillion won ($7 billion to $14 billion)”. .
SK Hynix has good reason to cut costs. This week, the company posted revenue of his 10.983 trillion won ($7.741 billion), down 7% compared to the same period last year. While the 7% year-on-year decline is hardly significant, the company also posted an operating profit of KRW 1,656 billion ($1,167 million) (down 60% year-on-year) and a net profit of KRW 1,010.3 billion (7%). $77.39 million). Q2 2022 (down 67% YoY).
Reduce production and focus on the premium segment
In addition to reducing CapEx, SK Hynix will increase production of premium products including 238-layer 3D NAND memory that can be used to power the fastest SSDs with PCIe 5.0 x4 interfaces. The company also plans to expand its memory production with his 1a-nm manufacturing technology in general and premium DDR5, LPDDR5 and HBM3 for high-end applications such as servers, AI and analytics accelerators.
Additionally, the company plans to reduce production of commodity 3D NAND and DRAM memory to balance supply and demand in the market. However, the company has not disclosed the scale of its planned production cuts.
SK Hynix announced in September that $11 billion fab in South Korea It is scheduled to go live in 2025. Whether the company can cut its CapEx budget and build the new production facility on time remains to be seen, but it could face a dilemma in spending on new manufacturing capacity. It seems that. .
Building a brand new fab is by definition more expensive than upgrading an existing production facility. SK Hynix has fabs in China and South Korea. A fab in China could be cheaper to operate (and the company needs to cut costs now) and there are exemptions for shipping new equipment from the US to China, so in the next 12 months It can even be upgraded with new tools as they are produced. Year. However, a company partner has received an export license from the U.S. Department of Commerce to ship new tools and spare parts to SK Hynix’s facilities in Wuxi and Dalian (formally controlled by Solidigm, a subsidiary of SK Hynix). If not, these fabs will be obsolete in 2018. A few years (i.e. 2025-2026).
Given the risks associated with fabs in China, it may make sense for SK Hynix to focus on investing in all-new fabs in South Korea. The company is currently reviewing several contingency plans for its facilities, some of which are reported to include relocating equipment to South Korea. Nikkei.
SK Hynix Chief Marketing Officer Kevin Noh said in this week’s earnings call: “This is a contingency plan. [continue to] It works without facing this situation. It is planned to be extended every year, but it is not certain. It’s very uncertain. “