(Bloomberg) -- SK Hynix Inc., a supplier to Apple Inc., posted its worst operating-profit drop since 2012, as memory-chip prices continue their free fall amid weakening demand from smartphone makers and data centers.
Operating income fell 69 percent to 1.37 trillion won ($1.2 billion) in the three months ended March, according to results released Thursday from the Icheon, South Korea-based company. Analysts surveyed by Bloomberg had expected a 65 percent slump to an average of 1.5 trillion won.
The results underscore challenges facing smartphone makers as they struggle to revive consumer appetite for new devices, while data centers around the world work through their high inventories of memory chips. Apple cut its sales forecast earlier this year and cloud operators have reduced their orders amid a worsening global economic outlook.
“We have yet to see any hard evidence of any kind of recovery in the chip market, let alone a quick ‘bounce back’ in the second half of 2019 that many bulls are calling for,” Semiconductor Advisors LLC said in an April 17 note.
Earlier this week, Texas Instruments Inc. cautioned that a rebound in customer demand for its chips may take time to materialize. In early April, Samsung Electronics Co. reported preliminary earnings that dropped the most in more than four years. Hynix and its competitors have said the memory industry is experiencing a low point and that prices are likely to improve in the second half of 2019.
Contract prices for 32-gigabyte DRAM server modules fell 38 percent in the March quarter, according to InSpectrum Tech Inc, while prices for 128 gigabit MLC NAND flash memory chips dropped 23 percent.
“The slowdown in the expansion of data centers is temporary.” Eo Kyu-jin, an analyst at Ebest Investment and Securities Co., said in an April 15 report. “The decline in memory prices will propel growth in demand.”
Apple is Hynix’s largest customer, providing about 13 percent of its sales, according to data compiled by Bloomberg. Intel Corp. and Huawei Technologies Co. also receive supplies from Hynix.
Together with Samsung and Micron Technology Inc., Hynix controls the bulk of the market for DRAM chips, used to store data on personal computers and servers. Any cuts to chipmakers’ capital expenditures could boost falling memory prices. Samsung said in January it was reducing spending this year to focus on the profitability of its memory operations, and Micron said last month it was curtailing output. With its earnings, Hynix said it sees DRAM demand for mobile and servers recovering from the second quarter.
To contact the reporter on this story: Sam Kim in Seoul at skim609@bloomberg.net
To contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Jeff Muskus, Peter Elstrom
©2019 Bloomberg L.P.
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