Chipmakers in ‘Unprecedented’ Slump Rule Out Quick Turnaround

Texas Instruments Inc. and SK Hynix Inc. offered a gloomy view of the chip market in their latest quarterly reports, dashing hopes of a quick rebound for the $550 billion industry.

Dallas-based TI, whose chips go into everything from home appliances to missiles, said Tuesday that revenue will top out at $4.8 billion this quarter -- at best -- short of the $4.93 billion analysts had projected. Hynix, meanwhile, said memory prices fell 20% over the last quarter and warned of “unprecedented deterioration in market conditions.” The Icheon-based company slashed its capital spending for next year by at least half.

The pair of earnings reports followed a rally for chip stocks in recent days. The Philadelphia Stock Exchange Semiconductor Index, a key benchmark, had climbed for seven straight sessions, gaining about 11% since the middle of the month. Investors have been trying to pinpoint when flagging demand for chips would begin to ease. Some welcomed Hynix’s action to stem oversupply and whittle down production of lower-margin products. Its shares rose as much as 2.1% in Seoul on Wednesday after slumping 29% on the year.

“The South Korean chipmaker’s dramatic capital expenditure cut is a bold statement demonstrating their determination to confront the escalated uncertainties,” said Hebe Chen, an analyst at IG Markets Ltd. The production cut “could boost the company’s margin if investors are willing to take a long-term view.”