Hynix Q3 2023 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

In Q2 of 2023, Hynix DRAM bit shipments was up around 20% sequentially (previous six quarters were up mid-30%, down around 20%, flat, down mid-single digits %, up 10% and down high-single digit %.) In NAND in Q3, bit shipments were up mid-single digits percent (previous five quarters this was up around 50%, down mid-teens %, down high single digits %, down low teens %, up high single digits % and up high teens %.) In DRAM ASPs were up around 10% sequentially (up high single digits and down high teens % in the prior two quarter) and NAND ASPs were slightly down Q/Q (down around 10% in the prior two quarters.) The DRAM market has clearly turned upward, with strong bit shipment increases in the last two quarters. More importantly, ASPs are up in the low 20% range over the last six months. This is positive but needs to be kept in context. That context is, DRAM pricing was down more than 50% in the year before this, so a 20% rise is still 40% below the peak level of DRAM ASPs in 2022. The NAND market has not yet turned but seems to be close to its nadir.

Overall company revenue was up 24% sequentially (up 44% in Q2, down 34% in Q1, down 30% in Q4-22, down 20% in Q3, rose 14% in Q2). Gross margin was positive 1% (was -16% in Q2 and -32.0% Q1) and operating margin was negative 20% (was negative 39.0% in Q2 and -67% in Q1). A year ago, in Q3 of 2022, gross margin was 35%. It dropped 6700 bps in two quarters after that.

For 2023, the company is forecasting DRAM demand bit growth to be up mid-single digits %. This is down from their forecast of up mid-to-high single digits % last quarter. It is surprising they revised this down given the market is strengthening faster than expected. They believe DRAM bit demand will grow in the high teens % in calendar 2024. For NAND, the company now expects bit demand growth to increase in the high single digits % in calendar 2023. This is significantly down from their mid-teens % in growth forecast last quarter. They have revised this down the last two quarters. Memory company executives almost always chase the downturn down. For calendar 2024, they see NAND bit demand growing in the high teens %. This is weak by historical standards.

Channel inventory has normalized in the PC market. The last domino to fall in inventory is the memory makers themselves. They are still burning off excess inventory. Hynix believes the PC market will see shipments grow in the mid-single digits percent in 2024. I assume this is unit growth. Mobile unit growth is also expected to be mid-single digits % in 2024. They are still cautious on the server segment, saying 2024 will see a “gradual recovery.” The company will increase capital expenditures in 2024 compared to 2023 but cautioned that incremental growth will be minimized. They are leaving the door open to invest more year-over-year, but don’t want to give investors the impression they will expand too quickly. Investment in 2023 was historically low, given the severity of the downturn. The company plans to increase DRAM bit output by around 10% sequentially in the fourth quarter. In NAND, they are lowering output of lower margin products, taking bit output down “teens %” in the fourth quarter.

Analyst Call

Here are highlights from the earnings conference call:

Prepared Remarks:

· Strengthening demand for DDR5 and HBM DRAM is leading that segment out of the downturn.

· DRAM prices turned positive in the second quarter and are better for Hynix than they are for the industry as a whole.

· Uncertainty in the global economy is delaying the recovery in the memory industry, compared to what was believed previously. Still, they believe the recovery in the memory industry is underway.

· The mobile market has entered its mature phase, meaning growth will be lower in this segment in the future.

· The company will expand production in segments where they have a competitive advantage. That is mostly in HBM.

· Most of their 1-alpha DRAM and 176L NAND products have reached mature yield levels.

· Company inventory levels declined meaningfully compared to Q2. Demand overall remains soft. Demand is stronger for DDR5 and other advanced products while it is weaker for DDR4 and other older technologies.

· In 2024, the company will invest more in technology migration than in capacity increases. Similar to Micron they will not recover wafer output to 2022 levels as they convert capacity to more advanced nodes. It will take “quite some time” for the industry to reach the same wafer production level seen in Q4 of 2022.


The DRAM market has turned and is on the way up. NAND seems to be either at the bottom or within one quarter of the bottom. Hynix made no further comments on reducing production and held the line on increasing capacity. When questioned directly, they gave a similar answer to Micron on wafer capacity increases, saying it will be some time before wafer output reaches the peak levels of 2022. Instead, capital expenditures will be focused on technology migration. The DRAM market has turned. The question now is how fast the recovery will happen. While prices are rising, they are still in an historically deep hole. To put some quantification on that statement, DRAM ASPs would need to rise around 70% from here to reach the peak levels of 2022.

  • Smooth Hughes (cyclical long MU)
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