SK Hynix's Full-Scale Earnings Improvement... Early Execution of Next Year's Investments This Year

Strong Demand for 1Q PC and Mobile Memory Semiconductors
Server Memory Semiconductors to Drive 2Q Performance
Early Execution of Next Year's Facility Investment This Year
Plan to Expand Investment in 8-Inch Foundry Business

[Asia Economy Reporter Su-yeon Woo] SK Hynix recorded an operating profit in the first quarter of this year that increased by more than 60% compared to the same period last year, officially entering a phase of performance improvement. As the overall memory semiconductor market conditions are expected to accelerate from the second quarter, SK Hynix plans to advance part of next year's capital expenditures to this year to respond to supply and demand.

On the 28th, SK Hynix announced its first-quarter management performance for this year, recording sales of KRW 8.4942 trillion, operating profit of KRW 1.3244 trillion, and net profit of KRW 992.6 billion. Sales increased by 18% and operating profit by 65% compared to the same period last year, slightly exceeding the consensus of securities firms.

◆ DRAM shipment volume up 4% QoQ due to increased PC and mobile demand = In the first quarter, SK Hynix's DRAM shipment volume increased by 4% quarter-on-quarter, and NAND flash by 21%. The improvement in first-quarter performance was driven by strong demand for memory semiconductors for PCs and mobile devices. In particular, the increase in remote work and online classes due to COVID-19 significantly boosted demand for laptops and PCs. According to market research firm IDC, PC shipments in the first quarter of this year reached 83.98 million units, marking the largest increase in 20 years.

SK Hynix expects the mobile memory semiconductor market demand this year to grow significantly, with DRAM increasing by over 20% and NAND flash by over 30% year-on-year. The server DRAM market is also expected to grow substantially from the second quarter as cloud companies increase investments in new data centers.

Won-sik Lee, a researcher at Korea Investment & Securities, said, "The recovery in DRAM demand, which started with mobile and PC, will expand to servers in the second half of this year," adding, "This is expected to benefit SK Hynix, which has a high sales proportion of server DRAM."

From the second quarter, SK Hynix plans to supply high-capacity MCPs (multi-chip packages combining various types of chips into a single product) based on 12GB DRAM and increase production of its main DRAM product, the 10nm-class 3rd generation (1z) product. Additionally, using extreme ultraviolet (EUV) lithography equipment, mass production of the 4th generation (1a) product is planned to begin within this year.

Although NAND flash prices have been declining until the first quarter of this year, prices are expected to reverse and rise from the second quarter. SK Hynix's strategy is to increase the proportion of 128-layer products to 80% this year and start mass production of 176-layer NAND flash within the year to strengthen competitiveness.

◆ Increasing investment in 8-inch foundry = To respond to the expected improvement in market conditions, SK Hynix decided to advance part of next year's capital expenditures to this year. Various measures are also being considered to expand the 8-inch foundry business, which is at the center of the global supply shortage.

The early execution of capital investment is to ensure the smooth introduction of equipment for cutting-edge technologies such as EUV lithography amid the ongoing global semiconductor supply shortage turning into a long-term securing battle. SK Hynix has finalized the total scale of next year's investment amount to be advanced to this year and has already confirmed investment execution for some equipment with long delivery times as of the end of March. Additional equipment investments will be made in the second quarter based on this plan.

SK Hynix also mentioned plans to expand investment in the foundry sector, which is gaining attention due to the semiconductor supply shortage. An SK Hynix official said, "We view the future prospects of the 8-inch foundry business positively and are considering investments from multiple angles," adding, "We also feel a sense of responsibility as a major semiconductor company regarding the global supply shortage, including the recent issues with automotive semiconductors."

Regarding the acquisition of Kioxia and the sale of shares, which could bring significant changes to the NAND flash market, SK Hynix expressed a cautious stance, stating that decisions will be made based on situations such as Kioxia's IPO. An SK Hynix official said, "Some shares initially participated in as financial investors (LPs) together with Bain Capital were planned to be sold on the market simultaneously with the IPO," adding, "We have heard that Kioxia plans to pursue an IPO again in the second half of the year, but the timing of investment recovery for LP investment shares cannot be arbitrarily chosen."

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