January 25, 2024

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SK Hynix returns to profit boosted by AI memory chip demand

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Chipmaker SK Hynix reported its first quarterly operating profit in more than a year as it benefited from booming demand for high-end artificial intelligence memory chips.

The South Korean company, which supplies the “high bandwidth memory” chips used in Nvidia’s H100 graphics processing units, posted an operating profit of Won346bn ($260mn) in the three months to December 31, outstripping analysts’ expectations compiled by LSEG SmartEstimates of a Won192bn loss.

That compares with a Won1.9tn operating loss in the fourth quarter of 2022, and a Won1.8tn operating loss in the third quarter of 2023, illustrating the global memory sector’s recovery after a year-long supply glut.

“We achieved a turnaround . . . following a protracted downturn, thanks to our technological leadership in the AI memory space,” chief financial officer Kim Woohyun told analysts on Thursday, as he outlined the company’s ambitions to grow into a “total AI memory provider”.

Initially used for high-end gaming graphics cards, HBM chips account for a growing share of the global dynamic random access memory market. They use stacking technology to improve the bandwidth and performance of GPUs in high-speed computers.

SK Hynix has pioneered the technology since it released the world’s first HBM chip in 2015, giving it a head start over South Korean rival Samsung Electronics, the other leading player in the HBM sector.

This month, SK Hynix’s chief executive Kwak Noh-jung said the company was aiming to double its market capitalisation over the next three years and exploit demand for components needed to train AI systems.

The company’s next-generation HBM chip, the HBM3E, is due to enter mass production this year, following a more than 500 per cent year-on-year increase in sales of its HBM3 chip.

SK Hynix is also developing an HBM4 chip that is expected to double processing speeds.

“Hynix is our preferred stock in the memory sector, as being a pure-play we think that Hynix will be the key beneficiary of the memory upcycle,” HSBC analysts wrote in a note this week, citing investments in AI server capacity and future demand for on-device AI.

SK Hynix reported a net loss of Won1.38tn in the fourth quarter, compared with a net loss of Won3.72tn in the same quarter a year ago. Revenues rose 47 per cent year on year to Won11.3tn.

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