Hynix sticks with plan to halve 2023 capital spending

After reporting its biggest quarterly loss on record, the company was hammered by a historic industry slump, SK Hynix Inc. stuck with plans to halve 2023 capital spending.

South Korean chipmaker is cutting output and capex as it waits for a recovery in the second half of the year, due to the fact that memory prices have fallen by more than 50% since their 2022 peak. The company said that sector-wide inventory levels will continue to grow but should peak in the six months to June.

In the three months ended December, Hynix, which supplies memory to Apple Inc., reported an operating loss of 1.7 trillion won $1.4 billion, a 38% drop in revenue. The average of analyst expectations was for a 1.1 trillion won loss.

The company said that with uncertainties still lingering, we will continue to reduce investments and costs while trying to minimize the impact of the downturn by prioritizing markets with high growth potential.

Hynix gained more than 1.5% after larger rival Samsung Electronics Co. said it would keep capex at 2022 s level, disappointing many investors who were hoping for a cut in 2023 supply.

The $160 billion memory industry is reeling from a large imbalance between supply and demand. Memory makers have three to four months worth of inventory, while clients have yet to use up their stockpiles. South Korea's exporters have been hitting the brakes in response to the slump in consumer spending worldwide. The country's exports decreased by 17% from a year ago in January.

Hynix has been saddled with an enormous amount of inventory. In addition to the macroeconomic climate, the acquisition of Intel Corp.'s flash memory business - since renamed Solidigm, has contributed to Hynix's inventory piling up faster than its peers.

Nam Dae-jong, analyst at eBest, said that Hynix's soaring inventory caused a decline in memory prices that exceeded market expectations. Nam said the company needed to constantly adjust capacity for the rest of the year, because of the high inventory.

Hynix and Micron Technology Inc. have slashed spending, but the memory chip leader Samsung said it will keep the capex pace last year. Morgan Stanley analysts including Shawn Kim said that Samsung would optimize its product mix and that it would send a nuanced message indicating a reduction in production output.

The market will improve gradually, thanks to China reopening and a recovery for mobile gadgets in the bottom half of the year, Hynix said. It said that the wafer output for both DRAM and NAND will likely fall from the previous year.

The 2 DRAM maker has devoted years to turning around its NAND business. It tried to solidify its market share and improve profitability through the acquisition of Solidigm s technology and factories, which includes facilities in China. The unit has faced a number of challenges, including a slump in demand and tighter US sanctions against tech exports to China.

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