SUMMARY

• Q1 operating loss reaches a staggering 3.4 trillion won ($2.54 billion)
• Memory chip downturn causes sluggish demand and falling product prices
• Recovery on the horizon? Industry insiders expect a rebound in H2

South Korean chip manufacturer, SK Hynix, found itself in a bit of a pickle, reporting a record-breaking quarterly operating loss of 3.4 trillion won ($2.54 billion) for Q1. Ouch. As fate would have it, this is their largest loss since SK Group came to the rescue in 2012. A far cry from the 2.84 trillion won operating profit they were celebrating this time last year, and an even bigger dip from the 1.89 trillion won loss they experienced just last quarter. Revenue? Well, that took a nosedive too, plummeting 58% YoY to 5.09 trillion.

Poor demand and dropping product prices had the world's second-largest memory chipmaker feeling the burn, but they're hopeful for a rebound in H2. With shares climbing 1.75% after an earlier 3.5% surge, SK Hynix is looking forward to an improved inventory situation and growing high-performance server markets to give their bottom line a much-needed boost.

Industry insiders, like James Lim of Dalton Investments, think the chip industry has "passed the bottom" and is "slowly grinding toward a recovery." However, CLSA's Sanjeev Rana warns that Q2 could still be a challenge, with memory chip prices potentially falling between 10% and 20%. But fear not, friends - a "sequential recovery" is in the cards for H2 as supply and demand balance out.

Meanwhile, Samsung Electronics, SK Hynix's rival, is gearing up to announce their Q1 earnings. Spoiler alert: they're expecting a not-so-impressive 600 billion Korean won ($449 million) operating profit, their lowest since Q1 2009. Yikes. Both SK Hynix and Samsung have been slashing chip production, giving the industry a bit of a breather, but more aggressive cuts could bring the sector to an "inflection point," according to Lim.
WOM Money Picks

Be a part of the winning team | 81% Success Rate.