SK Hynix reports record quarterly operating loss, forecasts better outlook

South Korean chipmaker SK Hynix has reported a record quarterly operating loss of 3.4 trillion won ($2.54 billion) for the first quarter of the year.

According to Reuters, this is its largest loss since the SK Group acquired Hynix in 2012.

This is a reversal from the 2.84 trillion won operating profit in the same period last year, and a larger loss from the the 1.89 trillion won operating loss the previous quarter. Overall revenue tumbled 58% year-on-year to 5.09 trillion, according to the company’s earnings release.

Net losses for the first quarter came in at 2.59 trillion won, compared to a 1.99 trillion profit in the first quarter of 2022.

The world’s second-largest memory chipmaker said operating losses widened as a result of “sluggish demand and falling product prices” as the memory chip downturn continued through the first quarter.

Still, the company is expecting a rebound in the second half of the year. Shares of SK Hynix were higher by 1.75% in afternoon trade after surging as much as 3.5% earlier Wednesday. The stock is up 16% year-to-date.

“Inventory across the memory industry is expected to improve from the second quarter with production cut by suppliers taking into effect,” the earnings release said.

“The growing high-performance server market for artificial intelligence including ChatGPT and a wider adoption of high-capacity memory products by customers” will also give the market a boost, the company said.

The outlook will likely improve from the next quarter, one analyst said.

James Lim, senior research analyst at Dalton Investments, told “Squawk Box Asia” the chip industry has “passed the bottom” and is “slowly grinding toward a recovery.”

“We expect revenues to rebound in the second quarter after bottoming out in the first, driven by a gradual increase in sales volume,” SK Hynix also said.

Rival Samsung Electronics is due to report first quarter earnings on Thursday. The chip giant issued guidance earlier this month saying operating profit for the first quarter will likely come in at 600 billion Korean won ($449 million). If the guidance is accurate, it would be the company’s lowest profit since the first quarter of 2009.

In early April, Samsung Electronics said it would make a “meaningful” cut to chip production, following similar moves by SK Hynix and Micron.

Lim said the supply cuts by Samsung are “going to give [a] breather to SK Hynix and Micron.”

However, he says that if chipmakers make more aggressive cuts, the industry might reach an “inflection point,” which he said may not be far from now.