SEOUL, July 25 ― South Korean chipmaker SK Hynix posted an 89 per cent quarterly profit plunge today amid sluggish demand, as a spat between Seoul and Tokyo threatens future earnings.
The long-running US-China trade dispute also weighed on the world's second-largest memory chip maker, with operating profit down for the third consecutive quarter to 637.6 billion won (RM2.22 billion).
Net earnings were down 88 per cent to 537 billion won while total sales were down 38 percent on year to 6.4 trillion won.
Market demand had “fallen short of earlier expectations”, SK Hynix said in a statement, with the price fall “steeper than anticipated”.
Demand for DRAM chips used in computer servers had stalled while the trade row between Washington and Beijing had affected the smartphone chip market, the firm said, adding it would adjust production and slash investment.
The figures come after market leader Samsung Electronics earlier in July forecast a 56 per cent drop in quarterly profits as a result of the weakening chip market.
More headwinds are in store for both firms after Tokyo announced this month it would restrict export to South Korea of several key materials crucial to chip manufacturing and smartphone displays.
The decision followed a court decision in South Korea ordering Japanese firms that used forced labour during World War 2 to compensate Korean victims.
Tokyo's move has raised international concern about the effect on global tech supply chains and the possibility of price hikes for consumers worldwide.
Weakening overseas demand for memory chips ― one of South Korea's key trade items ― is bad news for the country's export-driven economy.
Seoul's central bank cut the national growth forecast this year by 0.3 per cent to 2.2 per cent earlier this month, citing slowing exports.
South Korea's economy grew 2.7 per cent in 2018, the weakest pace in six years.
Shares of SK Hynix was trading 1.7 per cent higher in the afternoon while Seoul's benchmark KOSPI index was down 0.7 per cent overall. ― AFP