SK Hynix to make deep capex minimize; virus unfold might threaten chip output

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SEOUL (Information) – 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 mentioned it could sharply cut 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. Information/Kim Hong-Ji

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

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

The virus outbreak has brought on no manufacturing disruptions at Hynix, which has a chip plant within the japanese Chinese language metropolis of Wuxi, however manufacturing might be hit if the state of affairs was extended, Cha mentioned.

Till late final yr, prospects for the worldwide chip market had been bettering, aided by an easing of the U.S.-China commerce conflict, the rollout of 5G cellular networks and better spending by the info storage sector that helped minimize 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.three% on Friday, beating the benchmark’s fall of zero.2%.

SK Hynix’s conservative outlook echoes that of larger rival Samsung Electronics, which provided 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,” mentioned Track Myung-sup, an analyst at HI Funding & Securities.

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

“When the market situations enhance, we may flexibly overview funding plans, however we’ll take a cautious method contemplating market uncertainties,” Cha mentioned.

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

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

However restoration in chip demand helped raise South Korea’s manufacturing facility output in December, racking up its quickest leap since November 2016.

Reporting by Hyunjoo Jin and Joyce Lee; Enhancing by Miyoung Kim and Clarence Fernandez