SK Hynix reported its earnings for the second quarter of 2023 on Wednesday.
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South Korean chipmaker SK Hynix posted a second-quarter operating loss of two.88 trillion Korean won ($2.24 billion) on Wednesday as demand for memory chips remained sluggish.
SK Hynix said the weak memory chip market is on the road to recovery amid robust artificial intelligence demand, which resulted in a smaller second-quarter operating loss.
The quarterly losses were narrower than the three.4 trillion Korean won within the previous quarter which led to March, and in comparison with a 4.2 trillion won make the most of a yr ago.
That is compared with expectations for a 2.7 trillion won operating loss, in line with Refinitiv estimates, weighted toward analysts which might be more consistently accurate.
Memory chips are crucial to coach large-language models similar to ChatGPT. Such chips enable generative AI models to recollect details from past conversations and user preferences so as to generate humanlike response.
“Amid an expansion in generative AI market, which has largely been centered on ChatGPT, demand for AI server memory has increased rapidly,” the corporate said in its earnings report on Wednesday.
“In the long run, the AI related semiconductors or the DRAMs, are going to have a huge impact,” Anthony Sassine, senior investment strategist at KraneShares told CNBC Wednesday. “These are expected to grow between 35% to 40%. We’ll see numerous demand from that and that is probably underestimated.”
“I believe ChatGPT and generative AI this yr form of opened my eyes to and made that realization happened earlier than expected. And now we’re attempting to play catch up and I believe SK Hynix will profit from that,” said Sassine.
Shares of SK Hynix were trading 1.23% lower on Wednesday morning in Asia.
Revenue increased within the second quarter to 7.31 trillion Korean won, up 44% from the primary quarter of 5.08 trillion Korean won.
Consequently, sales of premium products similar to HBM3 and DDR5 increased, the corporate said.
“Having passed the trough in the primary quarter, the memory semiconductor market is seen to have entered the recovery phase,” said Kim Woohyun, vp and CFO of SK Hynix, within the earnings report.
Bullish on high-end DRAM products
SK Hynix is the world’s second largest maker of dynamic random-access memory chips after Samsung Electronics. DRAM chips are present in consumer devices similar to smartphones and private computers.
SK Hynix said in October it is going to be cutting its capital expenditure by half in 2023 to lower production after posting a 60% decline in third-quarter make the most of weak memory chip demand. Samsung and Micron have also announced capital expenditure cuts to lower production.
Smartphone and PC makers are scuffling with excess inventories of memory chips after stockpiling such chips in the course of the pandemic-induced boom. As inflation soared, consumers have been buying less of those goods attributable to rising inflation, prices for memory chips have fallen.
The corporate said sales of each DRAM and NAND flash memory products increased within the second quarter, and better average selling price of DRAM largely contributed to revenue growth.
“Although the value for general DRAM products similar to DDR4 continued to say no on sluggish PC and smartphone demands, DRAM blended average selling price rose within the quarter, offset by increased sales in high-end products used for AI servers,” the corporate said.
The South Korean memory chip maker expects the demand for AI memory to “proceed to remain robust” and a “clearer effect of production reduction by memory firms” is anticipated.
“The corporate’s stance on consolidated investment, which is to cut back that by at the least 50% in comparison with 2022, stays unchanged,” said Kim.
Sassine said he expects memory chip prices to go up this yr.
“So we have had declining prices for DRAM and NAND for last yr and half [of this year], and that inventory is anticipated to bottom out. We should always start seeing these prices go up in probably in Q3 or Q4, and that ought to help SK Hynix’s major business as of now,” said Sassine on CNBC’s “Squawk Box Asia” Wednesday.
SK Hynix will profit from the AI boom, said Sassine.