Seoul (The Hawk): Analysts predict SK hynix, the world's second-largest memory chip producer, to announce dismal third-quarter earnings next week, a stark shift from record-breaking performances in recent years, amid a cyclical downturn in the global semiconductor industry.
According to FnGuide, a Seoul-based financial services organisation, SK hynix's operating profit for the three months ending in September is anticipated to be 2.5 trillion won ($1.73 billion), a 38.8 percent decrease from the previous year.
Many analysts in Seoul, however, paint a bleaker picture, predicting that the chipmaker's operating profit will fall short of expectations, according to the Yonhap news agency.
According to KB Securities analyst Kim Dong-won, the company's Q3 profit is expected to be 1.6 trillion won, down 61.3 percent quarter on quarter and 61.1 percent year on year. He predicted that the chipmaker will run a deficit in the fourth quarter, with an operating loss of 186.9 billion won due to oversupply and dropping memory chip pricing.
Park Sung-soon, an analyst at CAPE Investment & Securities, lowered his estimate to 1.57 trillion won, citing declining demand in all semiconductor applications and chip buyers feeling pressure from rising inventory levels.
"Because SK hynix is anticipated to lose money in the fourth quarter and into the second quarter of next year as DRAM prices decline," he said, "I expect it to respond to market shifts by lowering production."
According to Wi Min-bok of Daishin Securities, the chipmaker is likely to disclose a strategy to reduce capital spending and cut down on production during an earnings call scheduled for Wednesday morning in order to contain the downward pressure on memory chip pricing.
He did, however, have a positive outlook, stating that SK hynix and Samsung Electronics (KS:005930), the world's top two memory chip makers, could see an improvement in long-term profitability beginning next year, owing to supply constraints caused by difficulties in manufacturing DRAM of more advanced process nodes, which the two firms excel at and will be increasingly in high demand.
"The semiconductor industry has begun to alter supply in response to Micron Technology's (NASDAQ:MU) news that it would reduce investment and capacity," Wi added.
Micron reported dismal results for the fourth quarter of fiscal year 2022 late last month, with revenues falling 19.7 percent year on year due to declining consumer demand and excessive inflation in major nations.
Earlier this month, Samsung Electronics forecasted a 10.8 trillion won operating profit for the third quarter, down 31.7 percent from the previous year, owing to lower consumer spending power, which led to a drop in chip demand from electronics makers, as well as cloud computing and server companies.
SK hynix will release its third-quarter results on Wednesday, a day before Samsung.
(Inputs from Agencies)