Memory Market Bottom Passed... Is SK Hynix Entering Its 'Spring Days'?

Signs of Memory Demand Recovery... Full Recovery Expected from Q4 Onwards

[Asia Economy Reporter Minwoo Lee] SK Hynix, which has endured a harsh period due to sluggish memory market conditions, is showing signs of a rebound. It is expected that a full recovery will be possible starting from the upcoming fourth quarter.

On the 26th, KTB Investment & Securities forecasted that SK Hynix will achieve sales of 7.9611 trillion KRW and an operating profit of 1.2547 trillion KRW in the third quarter of this year. Compared to the same period last year, sales are expected to increase by 16.4% and operating profit by 165.5%. Considering the concerns over performance due to a sharp decline in data center-related orders and delayed new iPhone launches in early Q3, this is analyzed as a solid result. It is noted that Huawei's urgent orders since late last month significantly contributed to the favorable performance.

In the fourth quarter, a full-scale rebound is anticipated. Some U.S. data center customers, who had drastically reduced server DRAM orders in early Q3 due to excess inventory, are expected to revise upward their planned capital expenditures (Capex) for this year and increase their orders in Q4. Although overall server DRAM demand in Q4 is unlikely to increase compared to the previous quarter due to the suspension of shipments to Huawei, a major server manufacturer, the recovery of some orders from large customers suggests future demand improvement, which is positive. For data centers, the launch of Intel's new server CPU in November is expected to coincide with the resumption of a large-scale Capex expansion cycle in the second half of next year.

Demand for mobile DRAM in Q4 is expected to slightly increase compared to the previous quarter. This is because smartphone competitors such as Oppo and Vivo are significantly increasing orders to capture market share from Huawei, and iPhone-related sales will become more active in Q4.

Demand in the PC sector is also expected to remain strong in Q4. School and public PC distribution projects in various countries will continue through next year, supporting strong demand. Some customers are reportedly already actively securing PC DRAM. Researcher Myungseop Song from Hi Investment & Securities explained, "Considering the demand trends in each sector, semiconductor order volumes in Q4 are likely to increase slightly compared to Q3," adding, "The decline in average selling prices (ASP) of mixed DRAM and NAND flash may also narrow compared to the previous quarter." Even in the worst-case scenario of weak demand in the first half of next year, given the current profitability of the memory industry, there is little room for further memory price declines after Q4.

Meanwhile, against this backdrop, KTB Investment & Securities maintained a 'Buy' rating on SK Hynix and raised the target price by about 9.5% to 115,000 KRW. The closing price on the previous day was 82,900 KRW.

This content was produced with the assistance of AI translation services.