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World’s second-biggest chipmaker sees sales soar as lockdowns boost demand

Edward White in Wellington

The world’s second-biggest producer of memory chips has reported a sharp increase in second quarter sales and profits as greater online activity during the coronavirus pandemic underpinned solid demand.

SK Hynix, which makes memory chips used by almost all modern electronic devices, says sales in the three months to the end of June rose 33 per cent to Won8.6tn ($7.2bn) year-on-year, while operating profit jumped 205 per cent to Won1.9tn.

The results for the South Korean tech giant, which were ahead of analyst estimates provided by Refinitiv, follows a first quarter net profit decline of more than 40 per cent after China’s nationwide shutdown in January and February.

But the lockdowns of cities and countries around the world during the pandemic has driven a surge in demand for the backend infrastructure — like computer chips and servers — that enable online meetings, conferences and classes, as well as gaming and content streaming. This has helped soften the blow from lower spending on consumer electronics, including smartphones — usually a key revenue source for tech groups.

Prices for DRAM chips, which help devices perform multiple tasks, rose 15 per cent quarter-on-quarter as sales for servers and graphics offset weak mobile demand, SK said. Prices for NAND chips were up 8 per cent amid higher demand for data storage.

The company said that despite continued uncertainties in the second half of the year — related to the virus and the US-China trade dispute — new gaming consoles, 5G roll-outs and the gradual reopening of economies should support further growth.

Analysts have cautioned, however, that the buoyant chip prices — which has in part stemmed from data centres stockpiling chips — might be only short-term given the backdrop of global economic uncertainty.

Still, the results also reflect the resilience of South Korea’s electronics manufacturers during the pandemic, particularly in the companies’ highly-automated chip factories at home and in China, which have seen few disruptions.

This month, SK Hynix’s bigger rival Samsung Electronics forecast a better-than-expected 23 per cent jump in second quarter profits.

SK Hynix’s shares have been trading about 20 per cent below their pre-pandemic peak but have recovered by around 25 per cent since March.