SK Hynix’s 4th quarter profits underscores growing demand for NAND memory chips

Gartner and SK Hynix have reported that demand for NAND memory chips are set to rise in 2018.

South Korean memory giant, SK Hynix, has reported a record surge in its fourth quarter profits, easing market concerns of a decline in memory chips demand.

With the news reaching the market, shares of SK Hynix rose by 5% on Thursday, up from a 20% slide in early November midst falling prices of NAND memory chips that are key components in USB drives and mobile phones, a mainstay for the firm.

Its fourth quarter operating profits have nearly tripled to a record $4.2 billion (4.5 trillion won), higher than the 4.3 trillion forecast by analysts. Its revenues have jumped by 69% to 9 trillion won, thus lifting its annual earnings to an all-time high of 13.7 trillion won.

Increased demand from servers at data centers are seen as key elements that are driving up its 2018 profits, said investors and analysts.

SK Hynix is the world’s second largest memory chip maker after Samsung Electronics Co Ltd.

“There had been various concerns such as the market slowing, NAND price dropping — but from today’s call, it doesn’t look like a slowdown is happening,” said Lee Seung-woo, an analyst at Eugene Investment & Securities. “There were also worries that the Intel bug issue or the sluggish sale of Apple’s iPhones might hurt memory chip demand, but the company dispelled them.”

Significantly, the firm stated it has not seen any decline in demand for memory chips due to the security vulnerabilities revolving around Intel’s CPUs. In fact, the issue is likely to further boost demand for servers since the vulnerability has an impact of high-traffic which could lead to more expansion of server facilities, said SK Hynix.

With regard to Chinese smartphone makers resisting higher memory chip prices, SK Hynix stated low end smartphone makers have very little room to maneuver a rise in memory prices and that it will consider such matters in its pricing strategy.

Predicting a growing demand for NAND memory chips, SK Hynix said their supply would grow in 2018 and ease shortages.

The supply of DRAM chips, used in servers, computers and mobile phones have remained tight due to limited production capacity.

As per Stamford, Connecticut-based Gartner, a data research firm, the total revenue of the memory chip industry in 2017 was $132 billion, up from $80 billion in 2016; it is set to rise further to $150 billion in 2018 before falling to $130 billion in 2019.

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