SK Hynix recently began the liquidation of its Shanghai sales office, which was established in 2006. It is shifting its core business operations in China to the Wuxi site, where it has a memory factory. The reason behind the restructuring is not just to improve operational efficiency. Industry sources believed that it's also related to deteriorating revenue in China and geopolitical risks.
Reports from Chosun Biz and Bloter, citing SK Hynix's 2023 audit report, pointed out that SK Hynix initiated the liquidation of its Shanghai sales office back in the fourth quarter of 2023.
Currently, SK Hynix has factories in Wuxi (DRAM), Dalian (NAND Flash), and Chongqing (packaging). It also has sales offices in Shanghai, as well as nearby in Taiwan and Hong Kong. The Shanghai sales office was established in 2006 and until 2018, it generated the highest revenue for SK Hynix in China.
However, SK Hynix launched its expansion project in Wuxi in 2017 and even started to establish hospitals and educational institutions in 2018, expanding the company's scale and gradually shifting the focus of its sales. In 2022, to complete the equipment and investment at the Wuxi factory, the company invested an additional, almost KRW2.4 trillion (approx. US$1.8 billion). As a result, the Shanghai and even Hong Kong offices near Wuxi saw their revenue decrease year by year.
Furthermore, amidst the US-China trade war and sluggish end-user demand, SK Hynix's revenue in China has deteriorated, prompting it to reduce production. Although there was a "patriotic consumption" trend in China in 2023, compared to Huawei, which uses its own semiconductors, SK Hynix's customers such as Oppo, Vivo, and Xiaomi have experienced relatively stagnant growth. It was reported that SK Hynix's revenue in China for 2023 as a whole was KRW1.11 trillion, a 17.2% YoY decrease.
Sources from SK Hynix stated that with the investment expansion at Wuxi, they have started to restructure the Shanghai office to improve operational efficiency. This is unrelated to the revenue decline in China.
Some observations also believe that geopolitical risks have contributed to SK Hynix's decision to liquidate its Shanghai office. As the US-China trade war intensifies, the operation of SK Hynix's factories in Wuxi, Dalian, and other locations faces uncertainty. Restructuring less important sales offices in advance can help reduce risks.
