SK Hynix Inc.

The stable outlook on SK Hynix reflects our expectation that the company will maintain its debt-to-EBITDA ratio at 0.8x–1.2x over the next two years despite the planned acquisition of Intel's NAND business. This is mainly due to the company's good position in the global DRAM market. We could lower our rating if SK Hynix's operating performance weakens significantly more than we expect, possibly due to deteriorating industry conditions, a lag in technological development, or failure in post-merger integration of Intel's NAND business. A downgrade trigger could be the ratio of debt to EBITDA exceeding 1.5x on a sustained basis. The ratings could also come under pressure if: (1) the company's growth strategy and financial policy--and therefore its debt leverage--become significantly

...Operating performance to recover in 2020 and 2021. SK Hynix Inc. is one of the largest producers of memory semiconductors globally, with 29%-30% dynamic random access memory (DRAM) market share as of June 30, 2020. 70%-75% of the company's sales come from DRAM, while the rest is from NAND flash. SK Hynix's performance improved in the first nine months of 2020 owing to favorable demand and higher memory semiconductor prices as the COVID-19 outbreak led to movement restrictions globally. Earnings also benefitted from the company's improved yield rates and cost reduction measures. We expect SK Hynix's EBITDA to rise 25%-30% in 2020 and increase further in 2021 on stabilizing memory industry fundamentals....

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