The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Min Seong Hwang - Samsung Securities Co. Ltd., Research Division - Analyst
: [Interpreted] Now it was mentioned earlier that you have focused on securing profitability in the third quarter. Now given the price increase in the
third quarter, had the company decided to sell at a little cheaper price than you could have sold more but you did not, so I believe that in and of
itself is quite a change. But then perhaps the stock prices don't see this continuing. In other words, don't see such trend continuing into the future.
And you also -- the company also mentioned earlier that the company intends to remain flexible in the fourth quarter as well. So do you also believe
that you -- the company can maintain this stance into the nonseasonality as well?
And also given the current supply and demand dynamics and the current inventory level, for how long does the company believe that you can
maintain this position? And now if the company were to maintain such position, then there could be also some worries about falling market share.
So do you believe that the company can maintain such, let's say, profitability-oriented business at the expense of market share?
And also, there were some mention of equipment contracting in the first quarter of next year, and can you just give us some explanation or give
us a view into the, let's say, the color or the tone of the discussions regarding the equipment contracting?
Unidentified Company Representative
[Interpreted] Well, that is a very important question. And likewise, it's a very important question for the company as well. And to be frank, we believe
that for the DRAM business, we do need to secure profitability for some time because we need resources down the road because we need to break
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OCTOBER 26, 2021 / 12:00AM, 000660.KS - Q3 2021 SK Hynix Inc Earnings Call
through many technological challenges, and we must also continue to provide the kind of customer support that we have done so. And -- but then
given the fact that currently, the higher operating profit is not automatically translated into a higher cash flow, we see that there can be some such
reasons why the stock prices have been reacting hyper sensitively to even the smallest changes.
Now having said that, they also say that the memory is raised to the industries. So we are very much cautious about artificially adjusting supply by
adjusting the pricing because given all that has gone on in the semiconductor industry, if we are also to enable to have stable supply of memory
as well, then the impact on the other industries will simply be too excessive. And also at the same time, when it comes to DRAM, the customers'
inventory remains relatively high. And for the suppliers, including Hynix, the inventory remains historically low. So we do believe that for the DRAM
side, there is room for some inventory buildup on our side.
But then for NAND, this is a different story because compared to the DRAM, NAND is still a growing market, and we believe that there is much room
for further growth. And because of this -- now, of course, from -- especially coming from the data center service side, we see that there is going to
be much growth in demand coming from the applications related to the data center server. So our supply strategy for NAND is in step with such
growth theme.
Now in the past, utilizing the funds from the operating profit, we would invest -- we would make a CapEx-centric investment. But now I believe
that for the memory market, we need to invest more in the R&D for the future. So rather than competing on CapEx, we need to invest in the R&D
for new memory or the next memory. And that is why it is very important for the company to secure profitability in both DRAM and NAND. But
then such profitability, again, is for the sake of investing into the future, not simply to compete on CapEx or capacity but to better prepare for our
future. So to answer your question, then yes, the company intends to remain profitability-centric for DRAM down the road. So the profitability
centricity will remain regardless of the cyclicality.
Unidentified Company Representative
[Interpreted] And now regarding the long-term agreement for the fourth quarter and the first quarter. Now it's not about the, let's say, the changes
in the share within the year, but then more about the changes in the business mix that are more interesting to us. And so we see that there are
increase in the DDR5. And also for next year, there are going to be increase in the high-specification products, like the graphics or HBM. So those
are the changes in the mix that we expect to see into the second half as well.
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