SK hynix Inc. said Thursday its second-quarter net plunged 88 percent from a year earlier, due to lower prices of memory chips and weak demand, and it plans to adjust output to respond to market conditions.
The net profit for the world's No. 2 memory chip producer came to 537 billion won (US$455.8 billion) in the April-June period, compared with 4.3 trillion won a year ago, the company said in a regulatory filing.
Its sales dipped 38 percent on-year to 6.5 trillion won, while operating profit plummeted 89 percent to 637.6 trillion won.
SK hynix said its dismal earnings were due to weaker-than-expected demand recovery and a steep fall in memory prices amid trade tension between the United States and China.
Bolstered by a boom in the global semiconductor market, SK hynix and local bigger rival Samsung Electronics Co. had registered record earnings in recent years, spearheading South Korea's export growth.
However, prices of DRAM and NAND products have continued to slide in the first half due to slow demand and a high level of inventory.
DRAM chip prices fell as major data centers adjusted their high inventory levels of memory chips, and NAND memory was also hurt by slowing smartphone demand as more consumers wait longer to replace their handsets.
Shipments of DRAM, used for temporary data storage in PCs and servers, increased 13 percent in the second quarter form a quarter earlier, but the average selling price fell 24 percent over the period, the company said.
For NAND flash, memory mainly used for mobile devices, shipments increased by 40 percent on-quarter thanks to demand recovery, but the average selling price decreased by 25 percent.
The chipmaker said it will cut output of major memory prices and focus on high-density products to improve profitability.
"SK hynix plans to adjust production and investment flexibly to respond to the market conditions," the company said in a release.
The company said it will cut its DRAM production capacity starting in the fourth quarter and will convert part of the DRAM fab line in Icheon, east of Seoul, to CMOS image sensor (CIS) lines in the second half to foster new growth drivers.
SK hynix also plans to decrease the NAND wafer input by more than 15 percent this year, up from its earlier plan to decrease it by 10 percent.
The company said it will review the timing of the expansion of its two fab lines in South Korea, expecting next year's capital expenditures will be "significantly lower" than this year.