SK hynix announced on Jan. 25 that it plans to more than double the production capacity of High Bandwidth Memory (HBM) this year compared to the previous year. This move is part of the company’s strategy to capture the new demand from artificial intelligence (AI) applications.
This shows the confidence of SK hynix, which was the first to successfully turn a profit in the fourth quarter of last year among the three global memory semiconductor companies, including Samsung Electronics and Micron. Securities analysts predict that the company’s annual operating profit will surpass 15 trillion won (US$11.23 billion) next year, riding on the “AI boom.” The management of SK hynix is reported to believe that the AI-driven upswing cycle starting this year will exceed the super boom level seen in 2018.
SK hynix’s performance in the fourth quarter of last year is evaluated as a “pleasant surprise” that completely overturns market expectations. Contrary to predictions that it would only reduce losses, operating profit reached 346 billion won (US$259 million). Sales also recorded 11.31 trillion won, representing a 47.4 percent increase compared to the same period the previous year. The figure surpassed the expected 10.47 trillion won. Analysis suggests that the semiconductor industry is recovering faster than expected driven by new demand from AI and industry cutbacks.
During the performance announcement event on that day, Kim Woo-hyun, vice president and chief financial officer at SK hynix, stated, “The upward trend in the memory market is expected to continue until next year.” Kim added, “Customers who anticipated the increase in memory prices began to increase purchase orders from the fourth quarter of last year. The new demand is emerging primarily from PC and mobile customers with low inventory levels.” He forecasted that DRAM would see recovery in demand-side inventory to normal levels in the first half of this year, while NAND would see the same recovery in the second half.
With the recovery trend in older products becoming apparent, SK hynix can now afford to make bold investments in new growth engines. The company aims to secure profitability by focusing on high-value-added products such as HBM and DDR5, responding to surging demand. Notably, HBM and DDR5 recorded remarkable performance with sales increasing fourfold and fivefold, respectively, compared to the previous year.
The decision to expand the production capacity of HBM is based on this background. SK hynix supplies fourth-generation HBM, HBM3, to NVIDIA, the world’s leading AI semiconductor company.
To take market leadership, SK hynix is also focusing on next-generation products. Representative examples include the high-performance mobile module “LPCAMM2,” which is applied to on-device AI, and the high-capacity server module “MCRDIMM.”
If SK hynix’s strategy of choice and focus proves effective, it is expected to achieve an operating profit close to 10 trillion won this year. Industry experts predict that next year, with the full impact of new AI-driven demand, the operating profit will exceed 15 trillion won. SK hynix’s highest recorded performance was an operating profit of 20.84 trillion won in 2018.