(Bloomberg) — SK Hynix Inc. said it expects a full recovery in the memory market, led by rising AI-related demand, and has suspended its capital spending plans.
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The leader in high-bandwidth memory that powers Nvidia Corp.’s AI accelerators. declared that it has entered a recovery phase, after recording the fastest pace of revenue growth since 2010, and said it is preparing greater spending to expand the capacity of its cutting-edge chips. .
Technology companies around the world are in a race to provide essential components for creating generative AI services. SK Hynix previously said it is investing about $15 billion in South Korea to meet growing demand for these next-generation chips, in addition to a plan to spend $3.9 billion on an advanced packaging factory and a research center for artificial intelligence products in Indiana. The company said it is increasing supplies of its cutting-edge HBM3E chips and is in talks with several customers about long-term contracts for these semiconductors.
Overall memory demand is also on a steady growth trajectory, it said, citing double-digit price increases in the broader DRAM market and a recovery in NAND prices. That more than doubled quarterly sales at the world’s second-largest memory maker, the company’s fastest pace of revenue expansion in more than a decade, while operating profit beat estimates.
Shares of SK Hynix, which have gained 27% this year, fell 3.9% during Thursday trading in Seoul, part of a broader sell-off in Asian stock markets following the weak outlook for Meta Platforms Inc. The biggest rival Samsung Electronics Co. fell 2.3%.
The company’s next-generation memory capacity is fully booked for this year and it needs new fabs to meet demand, said Tom Kang, director of Counterpoint Research. SK Hynix is expected to achieve revenue of nearly 61 trillion won and a profit margin of more than 20% this year, he said.
“This is a clear turnaround and the start of a record year for SK Hynix,” he said. The company said it expects demand for high-end memory to grow 60% annually.
Read more: SK Hynix CEO sees HBM supply tightness extending into 2025
Strong demand for AI server products is also helping to drive up DRAM prices. Demand for enterprise solid-state drives helped SK Hynix’s NAND business return to profitability in the first quarter, according to chief operating officer Kim Woo Hyun, who spoke on an earnings call.
Investment in 2024 will be slightly higher than planned at the beginning of the year, with most spending focused on high-margin products and infrastructure for medium-term growth, Kim said.
“Any impact on supply and demand for conventional products in the short term will be limited,” he said. “We will balance investing in future growth with ensuring financial strength, given our current level of cash generation.”
In the March quarter, SK Hynix reported higher-than-expected revenue of 12.4 trillion won ($9 billion), an increase of 144% year-on-year. Operating profit was 2.89 trillion won, the second-highest operating profit ever recorded in the first quarter and exceeding estimates of 1.8 trillion won.
SK Hynix is releasing its reports days after Texas Instruments Inc. released an upbeat revenue forecast for the current quarter, indicating that falling demand for industrial and automotive components may be easing. Samsung’s preliminary operating profit also showed a strong rebound in the first quarter, while Micron Technology Inc. last month gave a strong sales forecast.
SK Hynix has been struggling to maintain its lead over Samsung, which has pledged to focus its formidable resources on catching up in high-end memory.
SK Hynix’s newest factory will be built close to its existing production base in Cheongju. Separately, SK Hynix is proceeding with other domestic investments, including in the Yongin Semiconductor Cluster, where it will inject around 120 trillion won. The company plans to begin construction of the first factory in Yongin next year, with completion scheduled for 2027.
–With assistance from Vlad Savov and Youkyung Lee.
(Updates with shared reaction and executive comments)
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