SEOUL: South Korean chipmaker SK Hynix Inc has reported its biggest quarterly loss on record, due to plunging prices in memory chips, and stuck to plans to halve capital spending this year.

Slammed by prices of memory that have fallen by more than 50% since their 2022 peak, Hynix is cutting output and capital expenditure (capex) as it awaits a recovery in the second half of the year.

Bit growth of Hynix’s Dram and Nand chips will decelerate this quarter, it said. Sector-wide inventory levels will continue to grow, but should peak in the six months to June, the company said.

Hynix, which supplies memory to Apple Inc, reported an operating loss of 1.7 trillion won (US$1.4bil) for the three months ended in December on a 38% drop in revenue.

“With uncertainties still lingering, we will continue to reduce investments and costs, while trying to minimise the impact of the downturn by prioritising markets with high growth potential,” the company said in a statement, adding that it will focus on raising equipment efficiency.

The US$160bil memory industry is reeling from a large imbalance between supply and demand. Memory makers are sitting on three to four months’ worth of inventory, while clients have yet to use up their stockpiles.

But despite citing a “significant” deterioration in the business environment, Hynix’s cross-town rival Samsung Electronics Co said on Tuesday it planned to keep chip capex this year at the same level as in 2022, in a move that further weighs on prices.

“Hynix’s soaring inventory caused a decline in its memory prices that exceeded market expectations,” said Nam Dae-jong, analyst at eBest. Its inventory will remain high for the rest of the year, Nam said, adding the company needed to actively adjust capacity.

Unlike Hynix and Micron Technology Inc, which have slashed spending, memory chip leader Samsung continues to invest in new capacity, as it eyes medium to long-term demand.

Samsung’s capex plans triggered a sell-off of the two South Korean chipmakers’ shares, as investors had expected the world’s biggest memory chipmaker to slash capex and tighten memory supply.

Hynix’s total inventory has climbed as ebbing consumer demand and rising costs and interest rates caused client firms to pull back on spending and hiring.

In addition to the macroeconomic climate, an acquisition of Intel Corp’s flash memory business - since renamed Solidigm - has contributed to Hynix’s inventory piling up faster than its peers.

The market will improve gradually, helped by China’s reopening and a recovery for mobile gadgets in the bottom half of the year, Hynix said. But for the full year, wafer output for both Dram and Nand will likely fall from the previous year, it said.

Hynix, the world’s No 2. Dram maker, has devoted years to turning around its Nand business. It sought to solidify its market share through the acquisition of Solidigm’s technology and factories.

 - Bloomberg