“The memory market, which is still under tough conditions, seems to be bottoming out,” chief financial officer Kim Woohyun said. — Bloomberg
SEOUL: SK Hynix Inc signalled the memory chip sector will emerge from its deepest downturn later this year as a Chinese recovery and artificial intelligence (AI) drive demand, sending its shares almost 4% higher.
The supplier to Apple Inc gained its most in more than two weeks despite posting a second straight loss after revenue plummeted 60%. Executives told analysts they expect sales to rebound this quarter and memory market conditions to improve in the second half.
Those comments buoyed optimism about an end to an unprecedented slump that’s gripped the US$160bil (RM711bil) global memory industry, which has been sitting on months’ worth of inventory after global electronics demand cratered in the wake of a Covid-era boom.
Companies from Apple to Lenovo Group Ltd are struggling with persistently weak demand as consumers and corporations cut spending to deal with inflation and a potential recession.
“The memory market, which is still under tough conditions, seems to be bottoming out,” chief financial officer Kim Woohyun said in a statement.
Hynix reported an operating loss of 3.4 trillion won (US$2.6bil or RM11.3bil) for the three months to the end of March. That compares with the average estimate for a 3.46 trillion won (RM11.5bil) loss. But it also said memory inventory levels at clients fell throughout the first quarter, suggesting production cuts instituted last year are beginning to take hold.
The positive signal follows a rare decision by Samsung Electronics Co, by far the world’s biggest producer of the components vital to most devices, to join industry-wide reductions.
Samsung said it’d cut memory production to a “meaningful level” after reporting its slimmest profit since the 2009 financial crisis, potentially easing the glut.
The move spurred optimism that the industry, infamous for its boom and bust cycles, will climb out of its trough this year.
Much may depend on the Chinese economic rebound, the country remains the world’s largest market for personal computers and smartphones, which by some estimates is uneven but gaining steam.
A global boom in AI could also drive demand for data centres and servers, which rely on high-density memory chips for storage.
“The memory industry collectively has gone on offence by taking capacity offline as a way to better manage price degradation,” Mehdi Hosseini, senior tech hardware analyst at Susquehanna International Group, told Bloomberg Television. “This is going to help prices stabilise, probably by mid-year or into the third quarter.”
Micron Technology Inc, the largest US maker of memory chips, had already said client inventories were declining.
And even before Samsung’s decision, Hynix executives had said previously planned production cuts should take effect in the second half and help prop up prices. Hynix expects historically high memory inventories to peak in the first half and gradually decline afterwards. — Bloomberg
