SK hynix posts second-highest Q1 profit on AI chip boom

SK hynix headquarters in Icheon, Gyeonggi [YONHAP]

SK hynix posted its second-highest first quarter profit on the back of robust demand for advanced dynamic random-access memory (DRAM) chip and a strong recovery in NANDs this year.

The world's second-biggest memory chip maker and Nvidia supplier reported 2.9 trillion won ($2.1 billion) in profit during January-March period, making a quick turnaround from a loss of $3.4 billion a year earlier.

The profit highly exceeded the market consensus of 1.9 trillion won compiled by the FnGuide.

"With the industry’s leading technology in the AI memory space led by HBM [high bandwidth memory], we have entered a clear recovery phase," said Chief Financial Officer Kim Woo-hyun.

"We will continue to focus on improving our financial performance by offering industry-leading products at the right time and maintaining a commitment to profitability."

The company recorded its highest first quarter revenue of 12.4 trillion won, marking a 144 percent increase from the previous year, slightly above market consensus of 12.2 trillion won.

SK hynix plans expanded capital expenditure this year, according to the conference call.

"Capital expenditure in 2024 will increase from what was planned earlier in the year," said CFO Kim.

"But the increment is based on expanding production and securing infrastructure for high-margin products based on solid demand. It won't affect the production of short-term general products."

NANDs, a non-volatile type of chips that was in the red until the fourth quarter of last year due to slow recovery, also turned to profit in the January-March period.

Demand for NANDs recovered with Enterprise SSD at the center, SK hynix explained, adding that NAND price rose by more than 30 percent compared to the previous quarter.

"With growth in the AI market and rise of AI deployment by individual companies, demand for high-performance and low-energy NAND storage solutions will continue to climb," Kim said.

"This type of demand is considered new, derived from the AI market expansion and a structural change. We consider this a significantly positive sign as a NAND supplier."

SK hynix has announced a number of investments this year targeted at ramping up its DRAM production.

The previous day, the chipmaker announced an investment of approximately 20 trillion won in Cheongju to set up a DRAM line named M15X to cope with the rising demand, targeting completion in 2025.

The project will proceed separately from the 120 trillion won project in Yongin's chip cluster where SK hynix pledged to build four chip plants, the first of which is slated to start operation in 2027.

In the U.S., SK hynix is also setting up a chip packaging plant in Indiana dedicated to HBM where it will spend $3.9 billion.

SK hynix shares dropped by 5.12 percent on Thursday, closing at 170,600 won.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]