SK Hynix to make deep capex reduce as virus unfold threatens chip output


SEOUL (Reuters) – South Korea’s SK Hynix, the world’s No.2 reminiscence chip maker, warned a brand new virus outbreak in China may pose a menace to chip manufacturing and stated it could sharply scale back annual funding after posting a steep fall in quarterly revenue.

FILE PHOTO: The emblem of SK Hynix is seen at its headquarters in Seongnam, South Korea, April 25, 2016. REUTERS/Kim Hong-Ji

The unfold of coronavirus, which has killed greater than 200 individuals and contaminated practically 10,000 worldwide, threatens to hit the worldwide financial system. Producers have suspended manufacturing in China and airways canceled flights, disrupting provide chains.

“We’re getting ready a contingency plan,” SK Hynix finance chief Cha Jin-seok advised an earnings name on Friday.

The virus outbreak has brought about no manufacturing disruptions at Hynix, which has a chip plant within the jap Chinese language metropolis of Wuxi, however manufacturing might be hit if the scenario was extended, Cha stated.

Till late final yr, prospects for the worldwide chip market had been bettering, aided by an easing of the U.S.-China commerce battle, the rollout of 5G cell networks and better spending by the info storage sector that helped reduce bloated chip stockpiles.

That optimism fueled a chip share rally, with SK Hynix rising 15% over the previous three months. Shares in Hynix gained 1.3% on Friday, beating the benchmark’s fall of 0.2%.

SK Hynix’s conservative outlook echoes that of larger rival Samsung Electronics, which supplied a guarded forecast after posting a 34% revenue drop.

“The conservative feedback from Samsung and Hynix point out chip provides wouldn’t develop considerably, which ought to assist enhance the supply-demand stability,” stated Music Myung-sup, an analyst at HI Funding & Securities.

SK Hynix reduce capex by 25% final yr to 12.7 trillion gained and stated it could additional reduce funding this yr, citing uncertainties regardless of strong demand. It didn’t give an in depth spending plan.

“When the market circumstances enhance, we may flexibly review funding plans, however we are going to take a cautious strategy contemplating market uncertainties,” Cha stated.

Hynix, which provides chips to Apple Inc and Huawei, stated its December-quarter working revenue slumped 95% to 236 billion gained ($202 million), far under a 433 billion gained common forecast and marking the bottom revenue in seven years.

It additionally swung to a internet lack of 118 billion gained from a internet revenue of three.four trillion gained, reflecting a decline in funding valuations of Japanese peer Kioxia.

LG Show, a flat-screen maker for Apple, additionally warned that the outbreak fueled supply-side uncertainty, whereas battery maker Samsung SDI stated it could hit earnings within the present quarter.

Reporting by Hyunjoo Jin and Joyce Lee; Enhancing by Lincoln Feast and Clarence Fernandez.


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