SK hynix to cut investment for next year due to earnings shock

SK hynix says the company is considering measures to halve their next year’s investment compared to this year, announcing an “earnings shock” in third-quarter revenues on Wednesday. Recent downturns in the global economy, decreasing demands, and a slump in the semiconductor industry have rendered many enterprises cut their investment to the previous global financial crisis level, sending red signals to the entire Korean economy. Concerns over the degrading employment market are also growing.

According to SK hynix during its business performances presentation on Wednesday, the company’s third-quarter sales stand at 10.983 trillion won and operating profits 1.656 trillion won, which is 20.5 percent (13.811 trillion won) 60.5 percent (4.192 trillion won) drop from the previous quarter, respectively. Year-on-year, the figure dropped by 6.9 percent and a whopping 60.3 percent, respectively.

The performance drop is said to be originated from sliding demands for D Ram and NAND products, which are key product lines of the company, amid increasing economic difficulty across the world. Consumption of personal computers and smartphones has declined globally, shackling the demand for semiconductors. The third quarter’s operating profits of Samsung Electronics are forecast to have also dropped by 31.7 percent year-on-year. Samsung will announce its divisional performances on Thursday. The operating profits of the semiconductor business of Samsung Electronics are estimated to be down by 30 to 40 percent year-on-year.

“This year’s investment is a little under 11 trillion won, a jump from the last year’s. However, the company is considering cutting the amount by over 50 percent for next year,” Noh Jung-won, the business division chief at SK hynix, said during a conference call for the company’s third-quarter performance review. “The size of the reduction will be similar to that of 2008 to 2009, during the global financial crisis.” Accordingly, next year’s investment of SK hynix is forecast to be around seven to eight trillion won.


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