SK Hynix Inc.’s $24 billion rally this year is unraveling fast as the South Korean chipmaker finds itself embroiled in an intensifying US-China tech war.
A key supplier to both Apple Inc. and Nvidia Corp., SK Hynix has ridden this year’s artificial intelligence boom to surge more than 60% through the end of August. Bulls brushed aside the chipmaker’s dismal quarterly loss and warnings related to US restrictions on China, making the stock the most expensive among Asian chip giants.
“It looks like the share price is reflecting the fear of potential US sanctions,” after SK Hynix chips were found in the Huawei smartphone, said An Hyungjin, chief executive officer at Billionfold Asset Management Inc. The news on China’s iPhone usage ban “poured cold water and raised concerns that iPhone sales may be weak,” An said.
The chipmaker’s sales in the three months through June came in at just half of its revenue a year ago, while operating losses extended for the third straight quarter. One possibility is that Huawei may be tapping a stockpile of components it accumulated before the full set of US trade curbs had been imposed on it. But the concern is that the US government may further tighten its scrutiny on foreign partners’ business dealings with China.