SK Hynix Escapes Deficit with 'HBM Effect'... Accelerates Profit with High-Performance DRAM (Comprehensive)

Operating Profit Turnaround After 5 Quarters
Increase in HBM and DDR5 Sales + Production Cut Effects

Maintaining Conservative Production Cuts This Year
Boosting Profitability by Expanding AI Memory Production

SK Hynix succeeded in turning a profit in the fourth quarter of last year. This ended the operating losses that had continued since the fourth quarter of 2022 after five quarters. In particular, it showed a clear rebound with a surprise performance that far exceeded market expectations. It is analyzed that the sales increase of high-performance products such as Double Data Rate (DDR) 5 and High Bandwidth Memory (HBM), which are the main products, along with the full effect of production cuts over one year, became apparent. SK Hynix plans to maintain a conservative production cut policy this year as well and secure profitability through high-performance, high-capacity DRAM products.

HBM Sales Surpass 1 Trillion Won for the First Time

SK Hynix announced on the 25th that it recorded business results of 11.3055 trillion won in sales, 346 billion won in operating profit (operating profit margin 3%), and 1.3795 trillion won in net loss (net loss margin 12%) in the fourth quarter of last year. The fourth quarter consensus (average securities firm forecast) was 10.4447 trillion won in sales and an operating loss of 89.6 billion won, which was far exceeded.

SK Hynix explained, "In the fourth quarter of last year, demand for AI servers and mobile products increased, and the average selling price (ASP) rose, improving the memory market environment. As a result, the profitability-focused management activities that have been continuously pursued showed effects, leading to a quarterly operating profit for the first time in a year."

Thanks to the strong performance in the fourth quarter, the cumulative operating loss that had continued until the third quarter of last year was also reduced. The annual results for last year recorded sales of 32.7657 trillion won, an operating loss of 7.7303 trillion won (operating loss margin 24%), and a net loss of 9.1375 trillion won (net loss margin 28%).

SK Hynix stated that sales of DDR5 and HBM3 increased more than fourfold and fivefold respectively compared to the previous year. HBM sales reportedly surpassed 1 trillion won for the first time in history. Considering that the estimated total HBM market size last year was 5 trillion won, SK Hynix accounted for one-fifth of the market. According to market research firm TrendForce, SK Hynix holds an overwhelming 53% market share in the global HBM market last year, ranking first. Samsung Electronics holds 38%, ranking second. Looking only at the latest product, HBM3, SK Hynix's market share is estimated to be close to 90%.

Another reason for the earlier-than-expected turnaround to profitability is the recovery of upstream IT demand and customers reducing inventory, which caused memory prices to trend upward. Market research firm TrendForce expects DRAM and NAND ASPs to continue rising this year, assuming cautious production cuts by memory suppliers.

"We Will Increase Production of AI Memory"

SK Hynix’s performance outlook for this year is positive. In the first quarter alone, DRAM and NAND prices could jump significantly by 13-18% and 18-23% respectively compared to the previous quarter. For DRAM, there is also a forecast of a 3-8% price increase in the second quarter, followed by a high price increase rate of 8-13% in the third and fourth quarters.

The company plans to focus on mass production of the latest 5th generation AI memory product HBM3E and the development of the next-generation product HBM4, while supplying high-performance, high-capacity DRAM products such as DDR5 and LPDDR5T. It also plans to concentrate on preparing high-capacity server modules (MCRDIMM) and high-performance mobile modules (LPCAMM2) in anticipation of the spread of on-device AI. The company explained that shipments are expected to increase in major application markets such as PC, mobile, and servers, driven by product replacement demand and AI effects. In particular, in the PC and mobile sectors, the emergence of AI PCs and smartphones is expected to prominently boost the growth of related markets.

Production cuts will be reduced for some items. During the conference call following the earnings announcement, the company stated, "The principle is to increase supply for products with high demand and not to increase production for products with low demand." They added, "We will increase production of high-value-added products such as high-performance, high-capacity DDR5, LPDDR5, and HBM, but will maintain production cuts for products with low demand."