SK hynix suffered the largest quarterly loss in history, inventory soared, capital expenditure halved this year

SK Hynix is maintaining plans to halve capital spending in 2023 after posting its biggest quarterly loss on record, hit by a more than 50% drop in memory prices since their peak in 2022, and the South Korean chipmaker is cutting output And capital spending to wait for the recovery in the second half of the year. Inventory levels across the industry will continue to build but should peak in the six months to June, the company said.

Hynix reported an operating loss of 1.7 trillion won ($1.4 billion) in the three months to December, with revenue down 38 percent. Analysts had expected a loss of 1.1 trillion won on average.

"As uncertainty remains, we will continue to reduce investments and costs, while minimizing the impact of the recession by prioritizing markets with high growth potential," the company said in a statement on Wednesday.

SK Hynix shares rose more than 1.5 percent, paring losses on Tuesday when larger rival Samsung Electronics Co said it would keep capital spending at 2022 levels, disappointing many investors hoping to cut supply in 2023.

The $160 billion memory industry is reeling from a severe imbalance between supply and demand. Memory makers have inventories equivalent to three to four months, and customers have yet to run out of stock. South Korean exporters have been hitting the brakes in response to a slump in global consumer spending. The country's exports fell 17% in January from a year earlier.

SK Hynix in particular has been plagued by large inventories. In addition to the macroeconomic environment, the acquisition of Intel's flash memory business has also caused Hynix to accumulate inventory faster than its peers.

"Hynix's soaring inventory has led to a fall in memory prices that exceeded market expectations," said eBest analyst Nam Dae-jong. Nam said its inventory will remain high for the rest of the year, adding that the company needs to adjust production capacity aggressively.

SK Hynix and Micron have cut spending, but memory chip leader Samsung said it would maintain the pace of capital spending last year. Samsung also said it would optimize its product portfolio, which Morgan Stanley analysts including Shawn Kim said was a "subtle" message pointing to lower production.

Hynix said that the market will gradually improve with the help of China's reopening and the recovery of mobile devices in the second half of this year, but for the full year, DRAM and NAND wafer production may decline compared with the previous year.