SK Hynix sees solid demand for server chips offsetting weaker mobile, PC demand - Reuters

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A view of the logo of SK Hynix at its headquarters in Seongnam, South Korea, April 25, 2016. REUTERS/Kim Hong-Ji

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SEOUL, April 27 (Reuters) - South Korea's SK Hynix Inc (000660.KS) said it expects solid demand for server chips to offset a drop in personal computer shipments and weaker mobile demand growth, especially in China, after its first-quarter profit more than doubled on a year ago.

The world's second-biggest memory chipmaker on Wednesday posted a 116% jump in Q1 earnings, supported by solid demand from server clients, but slightly missed market expectations due to weaker demand for mobile chips and one-off costs.

"As demand for server chips is on the rise, the memory business will improve into the second half," said Kevin Noh, chief marketing officer at SK Hynix.

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Delivery delays in chip equipment caused by component shortages have hobbled capacity expansions and upgrades across the chip manufacturing industry, but SK Hynix will strive to meet customer demand by improving its yield rate, Noh said.

Operating profit rose to 2.9 trillion won ($2.3 billion) in the January-March quarter, its highest first-quarter profit since 2018. This was up from 1.3 trillion won a year earlier but below analysts' expected profit of 3.1 trillion won, according to Refinitiv SmartEstimate.

"Consumption of some IT products slowed down from the start of the year amid ongoing challenges, including the supply chain issue," the company said in a statement.

A disruption at a rival NAND flash chip plant owned by Japan's Kioxia and Western Digital (WDC.O) in February due to contamination of raw materials led to solid shipments and a quarter-on-quarter price rise for NAND flash chips, analysts said. read more

However, slowing demand for mobile chips due to China's COVID-19 lockdown and inflationary pressures weighed on earnings.

Worldwide smartphone shipments fell 11% during the period amid unfavourable economic conditions and sluggish seasonal demand, research company Canalys said this month.

SK Hynix said it expects the memory chip industry to continue to grow this year as it focuses on maintaining profitability - a stance that analysts said would help limit volatility in memory chip price and demand fluctuations, as memory chip makers refrain from aggressively expanding sales.

No. 1 memory chip manufacturer Samsung (005930.KS) has also flagged a similar stance. read more

Revenue climbed 43% on-year to 12.2 trillion won.

($1 = 1,261.0000 won)

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Reporting by Joyce Lee; Editing by Richard Pullin

Our Standards: The Thomson Reuters Trust Principles.

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