Recession Alarm? Apple Supplier SK Hynix’s Outlook Sours as Tech Demand Wanes

    South Korean chipmaker SK Hynix Inc. warned of waning memory growth and rising inventories, becoming the latest tech giant to sound the alarm over global economic uncertainty.
    By: BLOOMBERG
    | Updated on: Jul 27 2022, 20:56 IST
    Apple
    Apple supplier SK Hynix Inc. warned of waning memory growth and rising inventories.  (REUTERS)
    Apple
    Apple supplier SK Hynix Inc. warned of waning memory growth and rising inventories.  (REUTERS)

    South Korean chipmaker SK Hynix Inc. warned of waning memory growth and rising inventories, becoming the latest tech giant to sound the alarm over global economic uncertainty.

    The downbeat sentiment came after the Apple Inc. supplier logged a 56% jump in second-quarter profit on resilient demand and a weak Korean won on Wednesday. But executives said they see a slowdown in demand from its main growth engines of PCs, smartphones and servers.

    Recession concerns are prompting businesses to tighten costs, Chief Marketing Officer Kevin Noh said at a post-earnings news conference, adding that chip shipment growth forecasts for the current quarter have to be revised down.

    “Market growth for the year is going to be a lot lower than our expectations earlier in the year,” Noh said. With inventories likely to trend above average throughout the market, “it is inevitable that the capex for next year has to be adjusted significantly.”

    The company said it will decide on its 2023 capex plan as early as late-August -- ahead of its usual schedule. Hynix is considering slashing its 2023 capital expenditure by about 25%, joining US rival Micron Technology Inc. in cutting investment on fab expansions, Bloomberg News reported this month.

    Over the longer term, however, SK Group Chairman Chey Tae-won promised in a call with President Joe Biden that the group would invest $15 billion to build an advanced packaging and testing facility and support research programs in the US. The US is debating a bipartisan bill to bolster its semiconductor industry and fight Chinese competition by reducing its reliance on Asia.

    Shares in Hynix fell as much as 1.3% after the news, while the benchmark Kospi index was little changed.

    Predictions of a global recession have grown, and tech giants from Apple to Microsoft Corp. are pushing back spending and hiring plans for the next year. That has prompted Hynix and its rivals Samsung Electronics Co. and Micron to pledge to protect profitability and manage chip supply to keep prices stable.

    The market faces a potential glut of NAND as appetite for gadgets wanes. NAND flash prices are projected to fall by as much as 13% in the current quarter, and that may continue throughout the year, according to TrendForce.

    “Inventory problems have bubbled over upstream onto the supply side and sellers are under increased pressure to sell,” the Taiwan-based market research firm said in a note.

    Hynix's operating income rose to 4.2 trillion won ($3.2 billion) in the three months ended in June, narrowly beating analyst estimates of a 4.1 trillion won profit. Sales increased 34% from a year ago to 13.8 trillion won, missing the estimated 14.3 trillion won.

    Follow HT Tech for the latest tech news and reviews , also keep up with us on Twitter, Facebook, Google News, and Instagram. For our latest videos, subscribe to our YouTube channel.

    First Published Date: 27 Jul, 20:56 IST
    Tags:
    NEXT ARTICLE BEGINS
    keep up with tech