By Joyce Lee and Heekyong Yang
SEOUL (Reuters) -South Korea’s SK Hynix Inc on Wednesday said production cuts by memory chip makers will improve market conditions from the second half of 2023, after it reported a record operating loss for the first quarter.
The wider loss came as shipments of chip-equipped devices weakened due to global economic slowdown, worsening a supply glut and pushing down prices, the world’s second-biggest maker of memory chips said.
“We likely cannot expect a dramatic increase in prices in the second quarter given current demand… But with effects of production cuts appearing from the second quarter, we expect the supply-and-demand situation to improve from the third quarter.”
Earlier this month, compatriot Samsung Electronics Co Ltd, the world’s largest memory chip maker, said it would make a rare production cut as a demand drop had sent prices plummeting.
U.S. rival Micron Technology Inc also cut fiscal 2023 investment to about $7 billion from $12 billion a year earlier.
On Wednesday, SK Hynix said it is continuing to adjust production, though it did not say by how much. It also forecast artificial intelligence uses to drive an increase in memory chip revenue by 30% or more in the next five years.
After its comments, its shares traded up as much as 3.7% versus a 0.1% rise in the wider market.
“Memory chips are in serious oversupply… So SK Hynix signalling continued production cuts lifted shares,” said analyst Kim Sun-woo at Meritz Securities.
“Specifically mentioning its sales shipments in the second quarter will see double-digit growth and offset first-quarter decline also sent the message that the bottom is past.”
SK Hynix reported a January-March operating loss of 3.4 trillion won ($2.54 billion), matching analyst estimates and reversing the previous year’s 2.9 trillion won profit.
The loss is the deepest since SK Group acquired Hynix in 2012, and the second in a row after October-December’s 1.9 trillion won loss.
Revenue fell 58% to 5.1 trillion won.
($1 = 1,338.6600 won)
(Reporting by Joyce Lee and Heekyong Yang; Editing by Himani Sarkar and Christopher Cushing)
