Hynix Q2 2022 Earnings


I review the financial reports from the other significant memory manufacturers to learn more about the state of the DRAM and NAND markets, not to analyze the companies as investments. Hynix is Micron’s sister company. It is similar in size and is split 70-30 between DRAM and NAND. The Korean company has typically been more profitable that Micron at a given point in the cycle, but the gap has closed in recent years.

Investor Presentation

The headline in their lead slide is “IT demand conditions worsened rapidly.” Inflation, the war in Ukraine, lockdowns in China and continuing supply chain issues were noted on the supply side. Demand is at risk because of weakening sentiment in consumer spending and corporate investment. Hynix will focus on what they can control – their business.

In Q2, Hynix DRAM bit supply grew around 10% (declined high single digit % last quarter.) DRAM ASPs in Q2 declined low single digits, after dropping low-to-mid single digits in Q1. For the last three quarters, DRAM ASP declines were approximately 1%, 2.5%, and 5%, respectively. Higher bit growth and slower ASP declines may indicate a reduction in the rate of softening in the DRAM market. In NAND in Q2 of 2022, bit supply grew high single digits % and ASPs rose low single digits %. NAND bit growth last quarter was high teens % sequentially and ASPs grew low single digits in Q1. Excluding Solidigm (the former Intel NAND business,) bit growth was low teens % and ASPs rose low single digits. The NAND market continues to show surprising resiliency in pricing, given that two of the players have come out and said they will oversupply the market in 2022.

Overall company revenue rose 14% sequentially, with gross margin increasing 200 bps, to 46%. Operating margin saw a larger increase, going from 24% in Q1 to 30% in Q2. This margin crested at 34% to 35% in Q3 and Q4 of last year. Hynix’s total revenue is 64% from DRAM and 33% from NAND.

For the full fiscal year 2022, the company forecasts DRAM bit demand to low teens percent Y/Y and NAND bit demand growth around 20% Y/Y. This is a major change from three months ago when they forecasted high teens % growth in DRAM and 30% growth in NAND bit demand. Within the server segment, they believe demand is healthy overall though component shortages decreased demand in the first half of the year. The company believes customers will digest inventory in the second half of 2022. In PC and mobile they echoed what other companies have said, that unit demand will be lower than they previously thought in 2022. Units in both segments will decline in 2022.

Analyst Call

Here are highlights from the earnings conference call

• DRAM and NAND profitability both increased sequentially because of cost decreases from yield improvement and technology migration
• They are seeing reduced spending from consumers as well as businesses starting to tighten their spending
• Enterprise PCs, previously expected to be good this year, are now showing demand weakness, though content per system is offsetting the decline
• Low to mid-range mobile phone demand is weakening because of inflation, but flagship phone demand continues to be good
• Server demand was good in the first half, but Hynix is concerned these customers in the second half will lower their demand by consuming inventory and switching from on-premises to cloud services
• CapEx for 2022 will increase over 2021. The company is currently reviewing CapEx plans for next year, considering the potential to accumulate demand. This is a soft signal that they will be cutting capex for 2023.
• Both NAND and DRAM industry bit growth is expected to be flat in Q3, though there is much uncertainty around this. Hynix plans to be flat in their output in Q3. They stay with low teens % shipment growth for the year in DRAM. They are planning to outgrow the NAND market, at around 70% for the year, including Solidigm bits.
• Inventory in both DRAM and NAND went up about one week in the second quarter. The company will hold inventory rather than risk further oversupplying the market.
• Hynix + Solidigm believes they have the lowest cost structure in the NAND industry as they ramp their latest node. With this advantage, the company plans to dictate to the market how it will migrate technologies and the associated bit growth.
• Company bit growth in DRAM for the year will be low teens % up in 2022 over 2021
• Excepting 2019, NAND cost reductions have been more than enough to offset ASP declines, more so than DRAM
• In DRAM, Hynix remains profitability focused. It is vitally important to remain profitable there to fund new technology. In NAND, they will not disregard profitability, though not at the level of protection they put on DRAM.
• Their plan is to reach low 20% market share in NAND by the end of 2022 with the addition of Solidigm. In the long run, they are targeting much higher than this. They believe economies of scale are becoming more and more important over time.
• Including Solidigm, the company’s NAND business is expected to be profitable for the whole of 2022
• They receive 100% of their payments in USD, so weakening of the Korean Won helps them in some costs. About 40% of their total costs are in foreign currency.


This was a record quarter for company revenue. Gross and operating margins expanded. DRAM pricing declines have slowed in the last two quarters. Both DRAM and NAND cost declines were larger than ASP changes, leading to the expansion in margins. I wonder if the memory market isn’t a little better than many are giving it credit for. The company did a major down-revision in their forecasts for DRAM and NAND bit demand growth for all of 2022. They took DRAM down from high teens % to low teens %. NAND was reduced from 30% to 20%. Consumer demand in PCs and mobile phones is weakening but the server segment is holding up. They can’t do much about capex this year but signaled they will reduce capex next year. Management again said they will hold inventory, cut investment, etc. to protect DRAM profitability. Their statements about NAND profitability were not as strong, which has been their position for several quarters. They clearly said that the acquisition of Solidigm plus their technology roadmap in NAND will, they believe, enable them to take market share. This is the largest unsolved problem Micron faces today; the fact that they are the last sub-scale NAND maker left.

-S. Hughes (long MU)

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