SK Hynix posts highest quarterly profit in 6 years on AI chip leadership

SK Hynix, one of the world's major memory chip makers, has reported its highest quarterly profit in six years, thanks to its continued dominance in advanced memory chips crucial for artificial intelligence (AI) computing.

Here are SK Hynix’s second-quarter results compared with LSEG SmartEstimate:

• Revenue reached 16.42 trillion Korean won (approximately $11.86 billion), slightly surpassing the projected 16.4 trillion Korean won.
• Operating profit stood at 5.47 trillion Korean won, also beating expectations of 5.4 trillion Korean won.
• This quarter's operating profit marked a significant milestone, reaching its highest level since Q2 2018. It rebounded from a loss of 2.88 trillion won in the same period last year.

SK Hynix has seen a boost in demand for its memory chips used in AI chipsets, serving major AI players like Nvidia. However, the company has experienced a decline in its share price, mirroring the general downturn of the South Korean stock market influenced by US tech stock retreats following disappointing earnings from Alphabet and Tesla. Nonetheless, SK Hynix is optimistic about the future, expecting strong demand for AI servers to continue in the second half of the year, alongside a progressive recovery in traditional markets with the introduction of AI-enabled PC and mobile devices.

Capitalizing on the escalating need for AI memory, SK Hynix plans to maintain its market leadership in High-Bandwidth Memory (HBM) by initiating mass production of their 12-layer HBM3E products. Addressing the tight supply situation for HBM and dynamic random-access memory (DRAM), the company states that increased industrial investments will create overcapacity, with a significant portion directed towards HBM production. This anticipates a continuation of supply tensions for traditional DRAM as HBM capacity expands. Industry experts suggest the dearth of HBM supply is expected to persist until 2025 due to production bottlenecks, leading to a promising price environment and strong earnings for SK Hynix.

The soaring adoption of AI, especially large language models like ChatGPT, has put strain on the supply of high-bandwidth memory chips. SK Hynix and Micron disclosed earlier this year that they have been depleted of high-bandwidth memory chips for 2024, and stock for 2025 is also almost exhausted. These chips are crucial for high-performance AI tasks, enabling models to retain substantial quantities of information from previous conversations and user preferences, thereby generating human-like responses.

SK Hynix has emerged as a leading player in the high-bandwidth memory chip market, originally being the sole provider of HBM3 chips to Nvidia until Samsung reportedly passed tests for the use of its HBM3 chips in Nvidia processors for the Chinese market. Furthermore, SK Hynix has confirmed plans to ship the next-generation 12-layer HBM4 chips from the second half of 2025. With ongoing demand for AI applications, the future remains promising for SK Hynix and its strategic focus on high-bandwidth memory production.

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