SK Hynix Posts Lowest Profit in 7 Years, Warns of Growing Uncertainties

South Korea's SK Hynix, a chip supplier to Apple and Huawei, on Friday warned of growing uncertainties, after posting its lowest quarterly profit in seven years, hit by a protracted industry downturn.

The tech company said it would be cautious about investments despite improvements in demand, joining its bigger rival Samsung Electronics in offering a guarded outlook amid trade tensions between the United States and China and the new coronavirus outbreak in China.

SK Hynix, the world's No. 2 memory chip maker after Samsung Electronics, said its operating profit slumped 95 percent to KRW 236 billion in the December quarter, far below a KRW 433 billion average forecast drawn from 19 analysts, according to Refinitiv data.

That is the lowest quarterly operating profit since the fourth quarter of 2012, and well below KRW 4.4 trillion a year earlier.

The company also swung to a net loss of KRW 118 billion from a net profit of KRW 3.4 trillion, reflecting a decline in investment valuations of Japanese peer Kioxia.

"While SK Hynix sees the recent improvement in demand flows positively, the company will carry out more prudent production and investment strategies, as complexities and uncertainties still remain much higher than in the past," it said in a statement.

Memory chip makers have suffered a double-whammy with the US-China trade war hitting demand from clients such as smartphone makers and data centres, exacerbating oversupply after capacity increases during a boom in 2017.

Despite the industry slowdown, chip shares rallied last year, fuelled by hopes that memory chip prices are bottoming out as trade tensions eased and tentative signs sprouted that demand is recovering from data centres and smartphones.

© Thomson Reuters 2020