Good morning and good evening. First of all, thank you all for joining this conference call. Now we will begin the conference of the fiscal year 2018, second quarter earnings results by SK hynix. This conference will start with a presentation followed by a divisional Q&A session. If you have a question, please press star one, that is star and number one on your phone during the Q&A session. Now we shall commence the presentation on the fiscal year 2018, second quarter earnings results by SK hynix. Good morning and good afternoon and evening to those calling in from abroad. This is Park Seong-hwan, the Head of IR at SK hynix. Welcome to the SK hynix 2018 second quarter earnings release conference call. Before starting the conference call, allow me to introduce the executives present here with me today.
First, Executive Vice President in charge of corporate support and CFO, Lee Seok-hee, Vice President Kim Suk in charge of the DRAM Marketing Group, and Vice President Kim Jung Tae in charge of the NAND Marketing Group. Let me issue a disclaimer that all outlooks presented by the company are subject to change depending on the macroeconomic and market circumstances. With that, we will now begin SK hynix 2018 second quarter earnings release conference call. Let me now turn over to Executive Vice President Lee Seok-hee to present the second quarter earnings and the company's plan and market outlook. Good morning. This is Lee Seok-hee in charge of SK hynix corporate support. Let me begin with a review of our financial performance in the second quarter of 2018.
First quarter consolidated sales totaled KRW 10 trillion, and operating profit KRW 5 trillion, the highest ever for the company in a quarter. Consolidated sales was KRW 10.371 trillion, up 19% quarter-on-quarter. Bit shipment rose by a double-digit for both DRAM and NAND, as favorable market conditions continued in the second quarter. DRAM bit shipment rose by 16% quarter-on-quarter. Demand kept up solid growth. Led by computing products, to which the company responded actively. ASP rose by 4% quarter-on-quarter, rising across all DRAM products as tight supply continued despite the growing bit shipment. For NAND flash, bit shipment rose by 19% quarter-on-quarter. We met growing demand for high-density products from our mobile customers in the Greater China region, and demand for SSD products with our 48-layer and 72-layer products.
ASP fell 9% from the previous quarter, weakening in all product categories as supply grew overall. For MCP, sales fell from the previous quarter, with its portion out of sales reaching 20%. There was sustained increase in MCP price as Chinese smartphone makers continued to increase memory content per box. Bit shipments fell on the back of seasonality and inventory management to prepare for new product launches. Our operating profit in the second quarter was KRW 5.574 trillion, up 28% quarter-on-quarter, following higher sales and cost reduction. Operating profit margin was 54%. Depreciation and amortization expense for the quarter was KRW 1.572 trillion, up slightly from the previous quarter. EBITDA was KRW 7.146 trillion, representing an EBITDA margin of 69%. There was a net non-operating profit of KRW 330 billion.
There was foreign currency gain of around KRW 391 billion, following the continued weakness of the Korean won. Corporate tax for the second quarter was KRW 1.575 trillion, an increase by KRW 0.4 trillion from the previous quarter, due to increase in net profit before corporate tax. Our net profit after corporate tax for the quarter was KRW 4.329 trillion, with a net profit margin of 42%. With cash outlays for TMC investment, payment of 2017 corporate tax, and 2017 year-end dividend payments all occurring in the second quarter, consolidated cash balance at the end of the second quarter was KRW 4.405 trillion, a decrease by approximately KRW 3.86 trillion from the end of the first quarter. Our interest-bearing debt stood at KRW 5.415 trillion, an increase by KRW 1.548 trillion. Next, I would like to discuss the company's market outlook and plan.
Continuing from last year, favorable DRAM market condition was maintained in the first half, as the continued strong demand for server DRAM more than offset slowing mobile demand. With major IDC providers in the U.S. and China upwardly adjusting their CapEx plans, and as the focus on expanding their data centers coincides with businesses worldwide transitioning to the cloud, we expect the strength in server DRAM demand will be sustained for a prolonged time. In particular, we expect cloud service providers investment in the server infrastructure leading up to a planned launch of new services in the second half of this year to provide a strong demand base.
특히 고사양 스마트폰에서 디스플레이나 카메라뿐만 아니라 메모리 용량 차별화가 소비자들에게 중요한 고려 사항으로 자리매김하면서 모바일 시장 내 DRAM 고용량화 추세는 지속될 것으로 전망합니다.
For the mobile market, the effects of new smartphones with higher content per box and seasonality will more clearly materialize. Increase in the DRAM content per box in the mobile market is projected to continue as high-end smartphones compete not only on display and camera, but also differentiation through memory content. It is becoming an important consideration for consumers.
이밖에 상반기 대비 GPU 가격이 하락하면서 게임용 고사양 PC에 대한 대기 수요가 현실화되기 시작하였으며, 게임에 특화된 스마트폰 출시를 위해 중국 모바일 고객은 10GB 이상의 DRAM 탑재 계획을 밝히기도 하는 등, 게임향 수요도 DRAM 수요에 기여하는 비중이 점차 높아지고 있습니다.
Compared to the first half, pent-up demand for high-spec gaming PCs is being fulfilled as GPU prices are starting to fall. Some Chinese mobile customers already announced their plan to adopt 10 GB or higher mobile DRAM on special gaming phones, leading to demand for gaming devices, making higher contribution to the DRAM demand.
반면 하반기 DRAM 공급은 업체들의 wafer capacity 추가 노력에도 불구하고 미세화 난이도 증가에 따라 생산 증가분이 충분치 않은 데에 따라서 현재의 DRAM 수급 불균형을 해소하기에는 여전히 부족할 것으로 예상하고 있습니다.
Despite suppliers' continued attempts to increase wafer capacity, production is not increasing fast enough due to growing complexity in tech migration. Thus, DRAM supply in the second half will still not be enough to ease the current supply shortage.
한편, NAND 시장은 업체들의 72단과 64단 전환이 지속되며 공급 증가가 가속화되고 고객 인증이 이루어짐에 따라 각 솔루션 제품에서의 NAND 고용량화가 빠르게 진행될 것으로 전망됩니다.
For the NAND market, content per box is expected to rise quickly across all solution products as supply growth accelerates with suppliers' continued transition to 72-layer and 64-layer and as suppliers obtain customers' qualifications.
특히 대부분 공급 업체들이 제품 인증을 완료한 Client SSD와 일부 저사양 Enterprise SSD를 중심으로 공급이 증가하면서 SSD 채용률뿐만 아니라 NAND 탑재 용량도 지속적으로 증가할 것으로 기대됩니다.
In SSDs, NAND content per box, as well as SSD adoption rate, is expected to grow continuously as supply increases for Client SSDs, as well as some low-spec Enterprise SSDs, for which most suppliers have completed qualifications.
모바일 시장에서도 3D NAND 제품 공급이 증가하면서 flagship 스마트폰뿐 아니라 중저가 사양에서도 128GB 이상 NAND를 탑재한 스마트폰 출하 비중이 10% 중반까지 빠르게 늘며 하반기 중 모바일 NAND 수요를 견인할 것으로 예상됩니다.
In the mobile market, increased supply of 3D NAND is leading to wider adoption of 3D NAND, not only in flagship smartphones, but also in mid and low-end products, with smartphones adopting 128GB or higher NAND reaching up to mid 10% level, driving mobile NAND demand.
따라서 NAND 시장은 상반기 중 공급업체들의 높아진 재고와 고용량 제품 전환에 따라 공급이 증가하며 가격 하락이 지속될 것으로 예상됩니다. 하지만 NAND의 하반기 계절적 수요 증가와 높은 가격 탄력성으로 인해 수요 증가도 가속화되며 공급 증가분을 소화할 수 있을 것으로 생각합니다.
In the NAND market, price decline is expected to continue into the second half following supply growth due to higher inventory and transition to high-density products in the first half. With seasonal demand increase in the second half, and given the high price elasticity specific to NAND, the lower price is expected to accelerate demand improvement, which will absorb much of the incremental supply.
이러한 시장 수요에 맞춰 3분기 당사 출하량은 DRAM은 한 자릿수 후반, NAND는 30% 중반의 성장을 계획하고 있으며, 이를 통해 DRAM은 연간 20% 초반, NAND는 연간 40% 중반의 출하량 증가를 목표하고 있습니다.
Based on these market conditions, the company's bit shipment growth plan for the third quarter is high single-digit % for DRAM and mid 30% level for NAND. For the year, it is planned at low 20% for DRAM and mid 40% for NAND.
이를 위해 먼저 DRAM은 1x-nanometer 기술 전환에 주력하고 있으며, 계획대로 2분기에는 컨슈머를 제외한 전 제품에 동 기술을 적용함으로써 2분기 말 비중이 20%를 상회하였습니다. 하반기에는 수요 강세가 지속되는 서버와 모바일 제품 위주로 비중을 늘리면서 연말에는 DRAM 생산의 약 3분의 1 수준까지 확대할 계획입니다.
To that end, the company is focusing on 1x nano tech migration for DRAM. The technology was applied in all products except consumer DRAM in the second quarter, pulling up its portion to over 20% by the end of the second quarter. In the second half, we will keep increasing the portion of the high-demand growth server and mobile products to reach around one-third of total DRAM production by the end of the year.
NAND는 72단 양산 가속화에 집중하고 있습니다. 특히 하반기 고용량 모바일 시장과 SSD에 적극 대응할 계획이며, 2분기 출하를 시작한 72단 기반의 엔터프라이즈 SSD 공급도 그 대상과 물량을 확대해 나갈 것입니다. 따라서 연말 72단 비중은 전체 NAND 생산의 약 절반 수준에 도달하고, SSD 출하 비중은 비트 기준으로 연말까지 30% 수준에 도달할 계획입니다.
For NAND, we are focusing on accelerating the volume production of 72-layer 3D NAND. The company plans to actively respond to the high-density mobile market and SSD demand in the second half. The company also plans to increase the customer base and volume of the 72-layer-based Enterprise SSD, which started shipping in the second quarter. This will bring the portion of the 72 layers to around half of all NAND production by the end of this year, with SSD shipment in bit terms reaching 30% level at year-end.
아울러 미래 성장의 기반인 신규 팹 건설을 차질 없이 완료하겠습니다. 먼저 청주 M15 팹은 9월 말경에 클린룸 공사가 마무리될 것으로 보이며, 이후 장비 설치 기간을 감안하면 내년 초부터 생산에 기여할 수 있을 것으로 예상됩니다. 우시 팹 확장은 예정대로 연말경에 클린룸 공사를 완료하는 것을 목표로 하고 있습니다.
We will also move ahead with the new fab construction on schedule to secure the basis for future growth. The clean room will be completed in Cheongju M15 fab by the end of September. Accounting for the lead time for equipment installation, it should be ready to contribute to production from early next year. For the Wuxi fab expansion, the plan remains to complete the clean room by the end of this year.
하반기에도 세계 경제의 불확실성과 메모리 시황에 대한 우려가 계속될 것으로 보입니다. 하지만 SK hynix는 꾸준한 기술 개발과 투자를 통해 지속적으로 증가하는 메모리 수요를 충족함으로써 차별적이고 핵심적인 가치를 고객에게 제공할 수 있도록 최선의 노력을 다하겠습니다. 남은 하반기에도 여러분들의 많은 격려와 성원을 부탁드리겠습니다. 감사합니다.
It appears that uncertainties over the global economy and concerns over the memory market will persist into the second half. SK hynix will keep doing our best to provide differentiated core values to our customers by fulfilling the growing memory demand with ceaseless technological development and investment. I ask for your continued encouragement in the second half. This concludes my report. Thank you.
그럼 지금부터 Q&A 세션을 진행하겠습니다.
With that, we are now ready to take your questions.
[Foreign language] Now Q&A session will begin. Please press star one, that is star and number 1 if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and number 2 on your phone. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions per each participant. The first question will be provided by Dong-Je Woo from Bank of America Merrill Lynch. Please go ahead with your question.
예, Bank of America Merrill Lynch의 우동재입니다. 먼저 이렇게 굉장히 좋은 실적 달성해 주셔서 정말 감사하고 축하드립니다. 놀랐습니다. 두 가지 질문인데요. 첫째는 최근에 워낙 좋으니까 걱정이 되는 부분 먼저 질문하겠습니다. 첫째는 서버 DRAM 수요고요. 두 번째는 중국 휴대폰 메모리 채용 용량 한계에 대한 걱정입니다. 서버 DRAM 관련해서는 최근에 특히 하이닉스를 포함해서 2분기에 비크로스가 굉장히 높았던 게 중국 및 미국 업체들이 그 서버 DRAM의 재고를 많이 가져간 거 아니냐, 아니면 전반적으로 클라우드 관련해서 2분기까지 아마존을 포함해서 설비 투자가 굉장히 높았었는데 하반기에는 2분기 대비 그렇게 높은 설비 투자가 안 나올 거고, 오히려 재고를 확보했기 때문에 서버 DRAM 수요가 상반기 대비 좀 위축되는 거 아니냐, 이런 우려가 좀 있습니다. 이거에 대한 경영진의 견해를 주시면 감사드리고요. 그다음에 휴대폰 관련된 질문 올리겠습니다.
Thank you and congratulations on the excellent performance. Frankly, I am quite amazed. I have two questions. Because things are going so well, I would just like to point out some potential concerns. One is about the demand for the server DRAM going into the second half, second is about the Chinese smartphones and memory content limitation. The first question about the server DRAM. In the second quarter, not only SK hynix, but also other memory companies have seen their shipment growth go up considerably. That is probably because of the increase in the server DRAM inventory by the Chinese and the U.S. companies. There has also been extensive investment by cloud companies like Amazon in the second quarter in terms of their CapEx.
The concern is perhaps in the second half, there is not going to be as high a CapEx from the cloud companies. Also because of the inventory buildup so far, the server DRAM demand is going to fall in the second half. What would you say to this kind of assessment?
최근에 일부 기관에서 중국 쪽 서버 수요가 Q3에 좀 시그널이 있다, 하지만 그거는 일시적이고 Q4에는 회복될 것 같다라는 리포트가 있긴 있었습니다.
Regarding the question, it is true that some institutes have made the projection that from the Chinese companies, the demand for the server DRAM in the Q3, there are some mixed signals for the server DRAM demand from the Chinese companies. They also said that this is likely to be short-lived and there's going to be recovery in the fourth quarter.
실제로 저희 중국 서버 고객들의 재고 수준도 지난달과 비교해서 이번 달 파악된 내용도 크게 변동은 없는 상태이고, 오히려 추가 물량이나 Q3나 Q4 예정된 물량을 더 당겨서 달라는 그런 요청을 받고 있는 상황입니다.
In fact, what we have understood so far is that from the server DRAM customers from China, what we have seen is that in terms of the inventory level between last month and this month, there is not much change. Also in terms of the additional volume, actually, some of them are requesting that we pull ahead with the supply of the volume that they had planned for Q3 and Q4.
또한 미주 쪽 IDC 업체나 미주 쪽 서버 세트 제작 업체들의 투자 증가 분야, 그네들의 수요 부분도 큰 변동은 없습니다. 기본적으로 중국 쪽보다는 몇 배 더 큰 규모입니다.
Likewise, from the U.S. side, the IDCs and the server set makers. In terms of their investment growth or the demand, we do not see much changes. The volume coming from there is about multiple times of that from China.
결론적으로 저희 서버 DRAM 비즈니스는 중국 고객이든 미국 고객이든 1년짜리 LTA 기반이 거의 90% 이상이고요. 상반기는 계획대로 다 진행이 됐고, 하반기에도 현재 큰 변동은 없는 상태로 예정돼 있습니다.
For the server DRAM, basically, our business is 90% based on one-year LTA for both the Chinese and the U.S. customers. In the first half, the supply has been provided on schedule, we do not foresee much major changes in the second half either.
미드 로엔드 $100에서 $200짜리 리테일 프라이스들이 많이 있고요. 그들의 DRAM 용량이 이미 iPhone 수준을 넘어가고 있습니다. 더 작아지겠지만, 3GB, 4GB짜리들이 많이 있는데 과연 여기서 이들이 4GB, 5GB, 6GB로 이 DRAM 가격이 굉장히 stable한 상황에서 $100짜리, $200짜리 폰에 추가적으로 메모리 용량을 늘릴 수 있느냐라는 질문이거든요. 이거에 대한 뷰 말씀해 주면 감사하겠습니다.
My second question is for the Chinese smartphone makers, how much can they go in terms of the memory increase for the mid to low-end smartphones? For the mid to low-end smartphones, with retail price at $100 to $200, we see that in many cases, their DRAM content has already surpassed that of iPhone, going to 3 gigabytes or 4 gigabytes even. With the DRAM price remaining stable for these $100 to $200 phones, do you believe that they can keep increasing their memory to 4 gigabytes and 6 gigabytes? How far do you see them going?
네, 로우급 스마트폰에서 채용되는 DRAM 용량은 2GB, 3GB 정도가 맞고요. 하지만 반면에 미드 이상 하이급 플래그십에서는 그 이상 훨씬 더 큰 용량의 수요가 현재 발생하고 있습니다.
For the low-end phones, yes, it is true that the DRAM demand is for 2GB and 3GB mostly, for mid-end and also to the high-end, like the flagship phones, the demand is for a much higher content.
고용량 메모리는 마케팅 포인트일 뿐만 아니라 실제적으로 하드웨어 스펙을 상향하거나 또는 고성능 어플리케이션 니즈에 의해서 그 수요가 생기고 있는데요. 예를 들면 6GB, 8GB, 심지어는 올해 말 내년 초에는 10GB와 12GB 수요도 생기고 있는 상황입니다.
There is a real need for it as well as the marketing appeal. On one hand it has the marketing appeal to differentiate the product, but also at the same time, there's a real need as the hardware specifications keep getting upgraded and also as the applications keep getting higher and higher performance. Now we have the demand for 6GB and 8GB, and even now for the end of this year and early next year, the demand for 10 and 12GB also.
네, 감사드립니다.
네, 다음 질문해 주시죠.
다음으로 질문해 주실 분은 Mizuho증권의 Marcus Shin입니다.
The next question will be provided by Marcus Shin from Mizuho Securities. Please go ahead with your question.
네, 질문 주셔서 감사드립니다. 저 두 가지 여쭤보고 싶은데요. 첫 번째는 아까 언급해 주신 LTA에 관해서 좀 더 여쭤보고 싶습니다. 저희가 파악하기로는 올해 DRAM 경우에는 서버뿐만 아니라 다른 어플리케이션도 상당 부분을 작년 하반기에 LTA 연간 물량 확보하신 걸로 알고 있는데요. 올해 하반기에도 내년 공급 물량에 대해서 지금 LTA가 진행되고 있다고 저희 알고 있습니다. 가능하시면 올해 전체 SK hynix DRAM 공급에서 LTA가 차지하는 비중이 어느 정도 되는지 여쭤보고 싶고요. 또 내년에는 LTA 비중이 전체 DRAM에서 어느 정도 될 걸로 예상하시는지 여쭤보고 싶습니다. 혹시 구체적인 숫자가 밝히시기 힘드시면 구체적인 트렌드라도 말씀해 주시면 감사하겠습니다. 그리고 두 번째는 올해랑 내년에 CapEx 전망에 대해서 업데이트된 부분이 있으시면 알려주시면 감사하겠습니다.
I have two questions. First is about the LTA that you have mentioned earlier. What we understand so far is that you have the LTA, for the DRAM, both for the server DRAM as well as for other applications, you have the LTA until the second half of this year. I understand. As you have mentioned, it has been supplied on schedule in the first half and also it will be done so going into the second half. I wonder, the question is, out of your total DRAM supply, how much is covered by the LTA? What is the % of the LTA out of the total DRAM supply? Also the same question for next year. If you cannot disclose the specific numbers, can you at least tell us a trend? The second question is about the CapEx.
Are there any changes to your CapEx guidance for this year and next?
우선 첫 번째 질문 관련해서 아까 저희가 서버 DRAM은 90% 이상이 LTA 기반이라고 말씀드렸는데요. DRAM 전체로 보게 되면 90%보다는 조금 작은 수준으로 LTA 기반으로 되어 있습니다.
In my response earlier, I did mention that for our server DRAM business, it's 90% LTA. When we look at the overall DRAM supply, it is lower than 90%.
내년 물량에 대해서도 고객들과 현재 얘기가 진행 중이고요. LTA를 맺고 싶어 하는 고객들의 숫자는 그 물량은 상당량이 되지만, 내년에도 올해와 비슷한 정도의 LTA 비중으로 운영할 예정입니다.
For next year, we are also having discussions with our customers about the LTA. In terms of the customers wishing to have the LTA, the volume itself is quite large. In terms of the percentage, we believe that it is going to be more or less similar to this year's.
두 번째 질문하신 CapEx 전망에 대해서 말씀드리겠습니다.
Next about our CapEx projection.
올해 상반기에는 약 8조 원 정도의 CapEx를 지출했고요. 하반기에도 지금 M15 완공과 M15의 초기 설비 도입 등으로 인해서 상반기와 유사하거나 약간 상반기보다 좀 상회하는 CapEx가 예상됩니다.
The CapEx spendings in the first half of this year has been KRW 8 trillion. In the second half with the completion of the M15 as well as the equipment installation in the M15, we believe that the CapEx in the second half is going to be similar or slightly higher than that in the first half.
내년에는 또 M16팹의 설비 투자가 상당 부분 진행돼야 되기 때문에 올해보다는 약간 낮은 수준이 하겠지만 그래도 높은 수준의 CapEx가 내년에도 지속될 것으로 예상합니다.
Going into next year, we also need to have some CapEx for the Wuxi new fab. We believe that it is going to be at a high level next year as well, although it is likely to be lower than this year's.
네, 다음 질문해 주십시오.
[Foreign language] The next question will be provided by Peter Lee from Citigroup Global Markets Securities. Please go ahead with your question.
네, Citigroup 이세철입니다. 좋은 실적 축하드립니다. 저도 두 가지 질문을 드리겠는데요. 일단 앞에서 많이들 질문하신 거긴 한데, 서버 관련해서, 중국 서버 관련 노이즈 상황이 좀 있는데요. 중국 IDC 서버 수요가 글로벌 서버 수요에서 차지하는 영향력이 미국 대비 어느 정도인지 설명 부탁드리겠고요. 그리고 두 번째로 최근 채널 가격 하락 움직임이 진행되고 있는데요. 향후 고정 거래가에 영향을 미칠 가능성이 있다고 보시는지 설명 부탁드리겠습니다.
I also have two questions. One is a frequently asked question already, and that is about the server. For the server DRAM demand coming from China, the China's IDCs. What is the, let's say, the portion of the server DRAM demand coming from the China IDCs out of the total server DRAM demand, and especially in comparison with the demand coming from the U.S.? The second question is, now we see some downward trend in the channel price recently. Do you believe that this is also going to have an impact on the fixed price?
우선 첫 번째 질문 관련해서, 미주 쪽 Top 4로 대변되는 IDC 업체들의 올해 각각 업체들의 서버 DRAM 수요 숫자가 보통 업체당 수십억 기가비트에 달합니다. 반면에 BAT로 대변되는 중국 쪽 IDC 업체의 서버 DRAM 수요는 업체당 10억 기가비트 조금 미만이니까 비중으로 따지자면, 좀 차이 비중은 2~3배 이상 차이가 난다고 보시면 될 것 같습니다.
Regarding your first question. The server DRAM demand coming from the U.S., from let's say the top four IDCs. For each of them, the server DRAM demand is billions of gigabytes. Looking at China, the IDCs, for example, the BAT. For these Chinese IDCs, their server DRAM is slightly less than 1 billion gigabytes per IDC. In terms of the percentage, I would say that the volume from the U.S. is about two to three times larger than that from China.
절대 숫자 규모에서는 이러한 차이가 있지만 저희가 주목하는 것은 중국 IDC 업체들의 성장률입니다. 지난 과거의 성장률도 그렇고 향후의 전망도 미주 쪽 IDC 업체를 크게 압도했고, 압도할 것으로 보고 있습니다.
I did mention the absolute numbers, but that is for the present. When we look at the growth potential of the Chinese IDCs, it shows a bit of a different story. The Chinese IDCs overwhelm the IDCs in the Americas in terms of the growth percentage. That was so in the past, that is also the projection going forward.
두 번째 질문하신 PC 채널 시장 가격과 고정 거래와 관련해서, 사실 최근 PC 채널 시장은 규모도 워낙 작아졌고, 그래서 저희가 흔히 말하는 PC OEM 시장과는 완전한 별개의 독립 시장으로 보고 있습니다.
As for your second question pertaining to the channel price or the PC channel market price and also its relation to the fixed price. In terms of the PC channel market, the volume has become so small that we see this as a completely different market from the PC OEM market.
따라서 최근 PC 채널의 시장 가격이 저희가 PC OEM과 고정 거래하는 가격과는 decoupled 되어 있고, 그래서 영향을 미친다고 보지는 않습니다.
This means that the PC channel price has been decoupled from the PC OEM price, meaning that there is no impact from each other.
네, 다음 질문해 주십시오.
[Foreign language] The next question will be provided by Ricky Seo from HSBC. Please go ahead with your question.
질문 받아주셔서 감사합니다. NAND 관련해서 한 가지 질문드리고 싶은데요. 지금 시장에서 우려하는 부분은 이미 나오고 있지만, NAND 가격이 분기당 double digit으로 연말까지, 그리고 비수기인 내년 상반기까지 빠질 수 있다. 공급 증가 때문에. 실질적으로 공급 증가도 많이 나오고 있는데, 하이닉스에서 보시기에 이 트렌드에 대해서 어떻게, 3분기까지는 double digit으로 빠지는 것 같은데 4분기 이후에 대해 트렌드에 대해서 어떻게 보시는지
설명해 주시면 감사하겠고요. 2분기에 지금 이미 9% 빠졌는데, 상반기보다는 덜 빠졌는데 이게 NAND 마진이 하락하는 추세가 이미 시작된 건지, 그리고 하반기에 더블 디짓까지 연말까지 빠지면 흑자 기조를 유지할 수 있는지 궁금합니다. 특히 지금 72단 강조하셨기 때문에 48단에서 72단으로, 아니면 2D에서 72단으로 갈 때 원가 절감 효과가 어느 정도 나타나는지, 특별히 정확한 숫자는 아니지만 어느 정도 나와서 마진이 유지되거나 어느 정도 마진 트렌드를 보일지 설명해 주시면 감사드리겠습니다.
I have some questions about NAND. The concern in the market is that there's a projection that the NAND price will keep dropping by double digits per quarter because of the supply growth. This will continue. The projection is that this will continue into the early part of next year because of the seasonality. We do see that supply has been growing, in reality. For Hynix, what is your outlook? We see that, yes, there has been a double-digit drop in the price until the third quarter, but what do you see happening from the fourth quarter and on? If you could give us some, let's say, guidance in terms of the trend. Also looking at the second quarter, I see that the price drop was about 9%. This was lower than what we had expected, but still.
Perhaps this is the beginning of the decline in the NAND margin. In the second half, if the double-digit price decline continues, do you believe that you will be able to maintain a surplus position? Also you had emphasized the 72-layer. If you are to transition from the 48-layer to 72-layer or from 2D to 72-layer, how much do you expect in terms of the cost reduction? Maybe not the specific number, but just the rough extent. How much of an impact do you believe that this will have on the NAND margin? Do you believe that this will maintain the margin or what do you see as a trend?
고용량 제품이 채용이 확대되는 과정에서는 일정 수준의 가격 하락이 수반될 수밖에 없는데, 2분기에는 대부분 응용 분야에서 채용량 증가와 가격 하락이 발생하였고, 또 응용 분야별로 이 경쟁 상황에 따라서 수급이 발생하면서 추가적인 가격 하락폭의 편차가 있었습니다. 다시 말씀드리겠습니다. 고용량 제품이 채용이 확대되면서 일정 수준의 가격 하락이 수반되었고요. 2분기에는 대부분 응용 분야에서 채용량 증가와 가격 하락이 발생하였습니다. 그래서 응용 분야별로 경쟁 상황에 따라서 추가적인 가격 하락폭의 편차도 있었습니다.
As the adoption rate of high-density product increases, it is bound to be accompanied by a decline in the price. That is what we have seen in the second quarter as well. Across most of the applications, we have seen the adoption rate go up and the price go down. In terms of the actual price decline per application, there was some variances depending on the level of competition in each application.
하반기 시장은 64단, 72단의 공급 증가와 신제품 출시 등을 포함한 계절적 수요 채용량 증가로 인해서 전반적으로 안정적인 수급을 예상은 하지만, 수요 촉진을 위한 적정 수준의 가격 하락과 응용 분야별 수급 상황에 따른 가격 변동의 차이는 지속될 것으로 예상하고 있습니다.
Looking ahead to the second half, we believe that the supply growth will continue for the 64-layer and the 72-layer, also with the new products to be launched. Also with the seasonality, we believe that the adoption rate is also going to keep increasing. Also, because of the stable supply, the demand-supply dynamics is going to remain stable. As I have mentioned earlier, the price decline variation per application is also going to continue depending on the level of competition.
당사의 경우는 지속적인 원가 절감과 product mix를 통해서 공정한 수익성을 유지할 계획입니다.
Now for Hynix, what we plan is to maintain the same level of profitability by keep reducing the cost and maintaining the optimal product mix.
하반기 판매량 확대, 72단 비중 확대 등을 포함한 생산 효율성 증가 등을 통해서 단위당 원가폭 확대를 지금 계획하고 있고요. 동시에 수익성과 성장성을 고려한 응용 분야별 판매 비중 운영을 통해서 상반기 수준의 수익성을 하반기에도 지속 유지할 계획입니다.
Now, to be more specific, in the second half, we are going to try to increase the volume of sales as well as the percentage of the 72-layer out of the total sales. Also we would continue to try to reduce the cost. Also, we will be maintaining the product mix in accordance with the profitability and the sales volume to continue to maintain our profitability into the second half.
The next question will be provided by Claire Kim from Daishin Securities. Please go ahead with your question.
Now I have one question for NAND, another for DRAM. For NAND, what was the percentage of the SSD out of the NAND sales? Has there been a significant increase in the portion of SSD in the second quarter? Also for the enterprise SSD. Can you give us some guidance? The second question about DRAM. Now, according to a market research institute, they say that in the second half, there has been significant increase in the shipment of PCs. Also, do you believe that this is going to increase the demand for the PC DRAM?
Now, first question about NAND. In the second half, as we had explained earlier, we expect the NAND bit growth in the third quarter to be 30%.
We believe that overall in the second half, there is going to be about a 20% bit growth. For the eSSD, we started the sales in the second quarter, since then we have been trying to expand both the customer base and the product lineup. Based on these efforts, we are trying to pull up the portion of the eSSD sales to high single % level and to low 10% level by next year. Regarding the PC market, yes, there has been an increase in the percentage of the high-spec gaming PCs in the PC market and the overall PC performance was quite good in the first half. We believe that for the year, the PC set shipment is going to be only slightly in the minus or going to be flat year-on-year.
In fact, for Hynix, we have also increased our shipment for PCs in the first half. In the second half, in terms of our product mix by application, of course, it will also be affected by the percentage of application in the market in general, as well as the customer's demand fulfillment rate by application. Having said that, we believe that there is going to be a heavier weight on the mobile and server than PC.
The next question will be provided by Nicolas Gaudois from UBS. Please go ahead with your question.
Yes, good morning. Thanks for taking my question. On the DRAM roadmap, firstly, you commented about 1x-nanometer process so far seems to be a little bit better than expected. Could you help us clarify our view on when you expect 1y-nanometer to actually kick in for mass production? Your initial view of the portion of 1x-nanometer and 1y-nanometer will progress next year. I have a follow-up question. Thank you.
Yes. Let me expound on the development status of 1X nano and 1Y nano.
1X nano technology.
For 1X nano technology, by the end of the second quarter, it went slightly above 20% and we believe that by the end of this year it will be around one third or 33%.
1Y nano technology.
For 1y nano, our plan is to complete internal development by the fourth quarter and start both the volume production and customer qualification from early next year.
1X.
As for the portion of 1x and 1y nano next year, please understand that it is too early for us to tell because we still have to come up with the overall business plan for next year in the second half of this year.
Okay, thanks. Then, if I may, some clarification on your server DRAM business again. Really two things. Number 1, just to clarify, but when you talk about long-term agreements, you really refer to non-binding long-term agreements, firstly. Secondly, those long-term agreements, if you look at them in H1, would you say the actual volumes from hyperscale customers came in in the middle of the expected volumes or at the higher side? How do you see that changing into the second half of the year in terms of the actual procurement quantities falling, especially for Q3, or you actually have visibility within the middle of the expected range or the higher or the lower band? Has any of that changed at all on the social media side?
Obviously, you must be aware that overnight we had a fairly big miss from one of your key U.S. customers in terms of advertising revenues and also customer addition. Thank you.
First of all, yes, it is true that the LTA is non-binding. Given that today's market is a seller's market, we see that the customers are fulfilling the LTA in good faith. In the second half, actually the customers have asked for more than what we had committed in the LTA, so there has been an upside to the LTA commitment. Because of the tight supply, we were not able to fulfill the upside.
세 번째 올해 하반기 관련해서는 사실 미주 쪽 IDC 업체들이 내년 물량을 올해보다도 큰 폭으로 상향해서 저희와 논의하고 있는 중이기 때문에 하반기 예정된 물량을 무빙하는 데는 큰 문제는 없을 것으로 보고 있습니다.
The third point, looking ahead to the second half of this year, actually we see that the IDCs in the Americas in our discussions for the volume for next year, they are coming up with a volume that is much larger than this year. We do not see any problems in moving the volume that is planned for the second half.
Great. Very useful. Thank you very much.
네, 이제 마지막 질문해 주시죠.
[Foreign language] The last question will be provided by Seungwoo Lee from Eugene Investment & Securities. Please go ahead with your question.
네, 안녕하십니까? 질문 한 가지 드리겠는데요. 최근 주 52시간 근로 문제가 조금 이슈가 되고 있습니다. 우리 반도체 라인 같은 경우는 생산 라인은 저는 큰 문제가 없다고 보고 있습니다. 왜냐하면 현재 4조 3교대를 하고 있기 때문에 그 문제가 아닐 것 같은데, 업무의 연속성이 굉장히 중요한 R&D 같은 경우에는 이런 제한 조치로 인해서 예를 들자면 제품 개발 시간이 좀 지연될 가능성도 있고, 장기적으로는 경쟁력이 약화되는 거 아니냐는 우려를 하시는 분들이 있습니다. 특히 중국이 반도체 굴기를 내세워서 굉장히 적극적으로 쫓아오는 상황에서 어떤 치적의 빌미를 제공하는 것이 아니냐, 이런 우려들이 있는데요. 우리 SK hynix 내부적으로는 이에 대해서 어떤 복안이 있으신지, 또는 이런 시장의 우려에 대해서 어떻게 설명을 해주실지 말씀을 좀 주시면 감사할 것 같습니다.
I have one question. Recently, the 52-hour working limit per week has been a hot issue in Korea. I believe that this would have no impact on the production, because for the production lines, you have four teams in three shifts. For the R&D, where business continuity is important, potentially it could delay the development time needed for new products. Potentially this could weaken your competitiveness, especially at a time when China is very much committed to developing its semiconductor industry. Perhaps this is going to give China some room to catch up. For SK hynix, I wonder whether you have any, let's say, plans ready to ease the concerns coming out of the market.
말씀하신 대로 지금 52시간 제도가 7월 1일부터 시행을 하고 있습니다. 저희 SK hynix는 이에 대비하기 위해서 연초부터 이미 이게 입법이 예고가 된 상황이기 때문에 회사 자체적으로 각 분야에 걸쳐서 예행연습을 다 해왔었습니다.
Yes, it is true that as you have mentioned, the 52-hour limitation on the working week has gone into effect on July 1st of this year. For SK hynix, since it had already been noticed for legislation from early part of this year, we have been getting ready for this since the early part of this year. We have already done some rehearsal and also preparation for each division.
지난 6개월간의 준비 과정을 통해서 어느 정도 큰 변화이긴 하지만 지금 적응을 하고 있는 단계이며, 연구 개발 분야에 대해서는 일정 부분 플렉서블하게 적용할 수 있는 제도가 있기 때문에 그러한 부분을 활용하면 어느 정도 변화를 충분히 저희가 감당할 수 있을 거라고 예상합니다.
Over the past six months of preparation, we have been adapting to the new system smoothly. For the R&D in particular, there are some programs that allow some flexibility in the R&D activities. Taking advantage of such programs, we believe that we will be able to make the adjustment with no major problems.
네, 감사합니다. 네, 그럼 이것으로 SK hynix 2018년 2분기 경영실적 컨퍼런스 콜을 마치겠습니다. 감사합니다.
This concludes the SK hynix 2018 second quarter earnings release conference call. Thank you very much for your participation.