SK Hynix has referred to as US efforts to restrict know-how exports to China “painful” because it slashes capital spending over the subsequent 12 months to battle “unprecedented” slowing demand for chips utilized in electronics.
The South Korean chipmaker on Wednesday lower its 2023 capital expenditure by greater than 50 per cent after reporting a 60 per cent drop in third-quarter working revenue on account of greater inflation and sluggish world progress, lacking market expectations.
SK Hynix mentioned it anticipated difficulties upgrading its plant in Wuxi, China, on account of Washington’s newest export controls concentrating on China’s semiconductor business. The Wuxi plant accounts for almost half of SK Hynix’s manufacturing of D-Ram chips utilized in computer systems, smartphones and servers.
“Recently, a lot of geopolitical issues are affecting our business decision-making and the related restrictions are painful to us,” Noh Jong-won, the corporate’s president, advised analysts throughout a convention name.
The South Korean producer adopted rivals together with US-based Micron Technology and Japan’s Kioxia Holdings in slicing manufacturing after reminiscence chip costs slid about 20 per cent within the third quarter.
SK Hynix mentioned it might regularly scale back output beginning with lower-margin merchandise, because the business confronted “an unprecedented deterioration in market conditions”.
The transfer comes after the corporate’s third-quarter working revenue fell to Won1.7tn ($1.2bn), lacking analyst estimates of Won1.87tn, in accordance with Refinitiv. Third-quarter income fell 7 per cent to Won11tn.
Shares of SK Hynix rose as a lot as 2 per cent on Wednesday as traders went cut price looking. The inventory remains to be down 27 per cent 12 months thus far.
Along with TSMC, the world’s largest chipmaker, SK Hynix was granted a one-year exemption from the US restrictions, permitting them to deliver some new gear into Chinese factories with out Washington’s approval.
SK Hynix mentioned it anticipated to obtain a yearly extension of the non permanent waiver however warned it might wrestle to deliver essentially the most cutting-edge know-how into China. “It will not be easy for us to bring EUV [extreme ultraviolet lithography] equipment into the Wuxi factory,” mentioned Noh.
He didn’t count on the difficulties to trigger “critical trouble” for the corporate’s Chinese operations till the late 2020s however mentioned they might nonetheless drive up manufacturing prices.
Noh added that rising geopolitical dangers made diversifying its manufacturing bases “essential” in the long run however admitted it might not be straightforward to regulate them instantly.
He mentioned the corporate was making contingency plans for a worst-case state of affairs. “In the extreme situation where we can no longer operate the Wuxi plant, we can sell off the fab or the equipment or bring the equipment to Korea,” he mentioned.
Analysts count on the Wuxi manufacturing facility’s competitiveness to considerably weaken in two to a few years if SK Hynix can’t ship EUV machines to China.
“The US basically doesn’t want to see cutting-edge chips produced in China using EUV machines. It wants to see more of such an advanced chip production done in the US,” mentioned Kim Young-woo, head of analysis at SK Securities.
“The Wuxi plant will lose its competitiveness without EUV machines, against Samsung and Micron Technology.”
