It's a great time to buy DRAM and NAND, not to sell – just ask SK Hynix

Chip flinger slams brakes on production as it waits for demand to pick up

Oversupply in the memory market has savaged SK Hynix's first-quarter 2019 results, but the Korean chip flinger hopes for an improvement after June.

The vendor reported revenues for the quarter ended March 31, 2019 at ₩6.8 trillion ($5.86bn), a 22 per cent drop year-on-year, while profit fell 65 per cent to ₩1.1 trillion ($948m).

SK Hynix makes both DRAM and NAND. DRAM bit shipments were up about 10 per cent on the year prior but fell 8 per cent from the last quarter. Average selling prices (ASP) for DRAM fell more than 30 per cent on the year, according to Wells Fargo senior analyst Aaron Rakers. However, the company hopes to see 15-20 per cent DRAM bit growth this year.

It's not going to increase DRAM wafer capacities, focusing instead on technology transitions to smaller memory cells and so getting more memory bits from the existing wafer capacity. It will gradually increase the proportion of 1Xnm (16nm to 19nm) technology and start selling the smaller 1Ynm (approx 14nm to 16nm process) technology product in the second half.

NAND bit shipments increased in the 45 per cent to 50 per cent range year-on-year, but ASPs slumped 50 per cent or so due to intense competition. SK Hynix will reduce its NAND wafer capacity by more than 10 per cent while expecting bit growth of 35 per cent or more this year. The bit growth will come from increasing the 3D NAND layer count from 72 to 96 layers, with 96-layer production starting in the third quarter. That means it is already behind Micron, Samsung and Western Digital/Toshiba, which are all manufacturing 96-layer product already.

SK Hynix has also stopped producing 36- and 48-layer 3D NAND.

Rakers said the company took a ₩400bn (~$345m) inventory writedown during the March quarter because of NAND price declines and the startup costs of its M15 fab. Inventory levels rose 65 per cent on the year in the quarter to ₩5.117tn ($4.41bn) and that inventory will need clearing.

SK Hynix has to keep up with technology growth to avoid falling behind its competitors as it looks to the second half of the year for a demand pickup. ®