Workers on the operations floor of an SK Hynix plant in Icheon on August 25, 2015. Photo: AFP/Kim Min-Hee

The world’s second-largest memory chipmaker, South Korea’s SK Hynix, posted a 95% quarterly profit plunge on Friday as it suffers from a long-running lull in the global market.

The East Asian country’s chip manufacturers – led by behemoth Samsung Electronics – have enjoyed record profits in recent years as prices for their products soared.

SK Hynix supplies chips to companies from US giant Apple to China’s Huawei, but demand began to decline and supply increase after manufacturers invested billions in new factories.

Operating profit for SK Hynix dropped 95% to 236 billion won (US$198 million) year on year in the period October to December, the company said in a statement.

The firm also recorded a net loss of 118 billion won, while sales fell 30% to 6.9 trillion won.

For the full year 2019, net profit was 2.01 trillion won, down 87% on the previous year.

The manufacturer has been strained by a trade war between China and the United States and caught in a diplomatic row between Seoul and Tokyo over wartime history, with Japan in July imposing tough restrictions on exports crucial to South Korean tech giants.

“The increase in inventory burden and conservative purchasing policies on the side of customers led to a slowdown in demand as well as price falls,” the chipmaker said.

The company will “carry out more prudent production and investment strategies, as complexities and uncertainties still remain much higher than in the past,” it added.

Weakening overseas demand for memory chips – one of South Korea’s key trade items – is bad news for the country’s export-driven economy.

Rival Samsung faces similar challenges and has reported a 38% fall in net profit for the October-December period.

Shares in SK Hynix were up 1.06% in Seoul in early morning trading.

AFP

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