Analysts predict that SK Hynix, the second-largest manufacturer of memory chips in the world, will announce disappointing third-quarter results next week. This will be a sharp contrast to the company’s previous record-breaking performances and comes as the global semiconductor industry is experiencing a cyclical downturn.

According to FnGuide, a financial services firm based in Seoul, SK hynix’s operational profit for the three months ended in September is anticipated to have been 2.5 trillion won ($1.73 billion), down 38.8% from a year earlier.

However, many analysts in Seoul paint a more bleak picture, predicting that the chipmaker’s operating profit will fall short of expectations, according to Yonhap news agency.

The company’s Q3 earnings is anticipated to be 1.6 trillion won, down 61.3 percent sequentially and 61.1 percent compared to the same period last year, according to KB Securities analyst Kim Dong-won.

Due to an oversupply and declining memory chip pricing, the chipmaker may end up in the red in the fourth quarter with an operating loss of 186.9 billion won, he claimed.

Park Sung-soon, an analyst at CAPE Investment & Securities, put the estimate even lower at 1.57 trillion won, as slowing demand is detected in all semiconductor applications and chip buyers are feeling heavy pressure from growing inventory levels.

“As SK hynix is expected to make a loss in the fourth quarter and into the second quarter of next year with falling DRAM prices, I expect it to respond to market changes by reducing supply,” he said.

Wi Min-bok at Daishin Securities echoed the same view in his latest report, saying the chipmaker is likely to announce a plan to reduce capital spending and cut back on production during an earnings call, slated for Wednesday morning, in order to limit the downward pressure on memory chip prices.

But he also held a positive outlook, saying SK hynix and Samsung Electronics, the world’s top two memory chip makers, could see improvement in their long-term profitability starting next year, amid supply restraints coming from the difficulties in making DRAM of more advanced process nodes, which the two firms excel at and will be increasingly in high demand.

“The chip industry has begun to adjust supply, following an announcement by Micron Technology that it would reduce investment and capacity,” Wi said.

Late this month, Micron announced disappointing financial results for its fiscal year 2022 fourth quarter, with sales falling 19.7% year over year due to sluggish consumer demand and high inflation in advanced markets.

Samsung Electronics predicted earlier this month that its Q3 operating profit would be 10.8 trillion won, down 31.7 percent from the same quarter a year earlier.

This was due to weaker consumer spending power, which also caused a decrease in chip demand from electronics manufacturers as well as cloud computing and server companies.

On Wednesday, the day before Samsung releases its Q3 earnings report, SK Hynix will report its results for the third quarter.

(inputs from IANS)