Chipmaker SK Hynix to halve investment amid looming recession

South Korea's SK Hynix Inc warned on Wednesday of an "unprecedented deterioration" in memory chip demand, deepening fears of global recession, and said it would slash investment after quarterly profit tumbled 60%.

Chipmakers had enjoyed a strong post-pandemic demand surge until early this year. But demand has turned sharply weaker in recent months as soaring inflation, rising interest rates and gloomy economic outlook have led consumers and businesses to tighten spending.

"We are hoping that the market will stabilise to some extent by second half of next year, but we are not ruling out the possibility of a longer downturn," Kevin Noh, Chief Marketing Officer at SK Hynix, told analysts.

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Dire projections by Hynix follow warnings of decreased growth given by US tech giants this week. On Tuesday, Microsoft had projected quarterly revenue below Wall Street targets.

SK Hynix said its operating profit fell to 1.66 trillion won ($1.16 billion) in the July-September quarter, from 4.2 trillion won a year earlier. The result was below analysts' expectations of a 1.87 trillion won profit, according to Refinitiv SmartEstimate.

"Supply will continue to exceed demand for the time being," SK Hynix said in a statement, pointing to a fall in notebook and smartphone shipments.

The company said that memory chip prices plunged by 20 per cent in the third quarter. The company attributed this to dropping PC and smartphone shipments data centres prioritising using up existing chip stocks.

(with inputs from agencies)

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