[Concall] SK Hynix's H2 Performance Depends on HBM and DDR5 (Comprehensive)

On the 26th earnings call, questions focused on HBM and DDR5
Strong AI memory demand continues... Memory companies' production cuts also effective
Next year's investment direction: 'Expand HBM mass production'

SK Hynix's second half performance is expected to be determined by the prices and sales volumes of high-bandwidth memory (HBM)3 for artificial intelligence (AI) and high-performance double data rate (DDR)5 DRAM. This is why investors' questions during SK Hynix's Q2 earnings conference call held on the 26th focused on these two products.

During the conference call, SK Hynix stated, "The revenue share of graphic DRAM, including HBM, in total DRAM sales increased to double digits in Q4 last year and grew to around 20% in Q2 this year." They added, "By expanding the sales proportion of HBM required for AI servers and high-capacity DDR5 modules, we contributed to the improvement of the average selling price (ASP) of DRAM."

The company assessed that strong demand for AI memory will continue in the second half of the year and that the effect of production cuts by memory companies will become more apparent. In fact, with the expansion of AI server demand and NVIDIA's plan to increase HBM adoption, expectations for SK Hynix's DDR5 and HBM are rising.

Accordingly, SK Hynix plans to steadily increase sales centered on HBM3, DDR5, LPDDR5, and 176-layer NAND-based solid-state drives (SSD). In particular, they plan to start mass production of the 5th generation product, HBM3E, in the first half of next year and mass-produce the 6th generation product, HBM4, in 2026.

SK Hynix said, "Considering the past three years of transitioning from HBM2 to 3 and the 3E adoption plan, the product life cycle is moving quickly at two-year intervals," adding, "Taking this into account, it seems that from 2026, we will move on to the HBM4 generation." They continued, "Based on customer feedback, from the perspective of time to market (TTM, rapid market response capability), SK Hynix is confirmed to be leading in terms of product completeness, mass production (yield rate), and even field quality," emphasizing, "We plan to continue leading the market based on the experience and technological competitiveness accumulated over a long period from the early formation of the HBM market until now."

Market research firm TrendForce estimated SK Hynix's global HBM market share at 50% last year. Samsung Electronics and Micron were estimated to hold 40% and 10%, respectively. The HBM market is expected to grow at an average annual rate of 45% until 2025.

Next year's investment direction is also expected to focus on expanding HBM mass production. SK Hynix explained, "Next year, maintaining technological competitiveness and sufficiently responding to increased demand will make minimal investment levels like this year insufficient," adding, "We will prioritize investment to expand HBM mass production, but company-wide, we plan to focus on process transitions rather than capacity expansion to continue operations based on capex efficiency."

Along with this, SK Hynix announced that it will improve the initial mass production yield and quality of the 10-nanometer class 5th generation (1b) DRAM and 238-layer NAND this year to quickly increase their production share during the upcoming upturn. However, they noted that NAND inventory reduction is slower compared to DRAM and decided to expand the scale of NAND production cuts.

SK Hynix stated, "Memory demand has been recovering since Q2, but it is still insufficient to normalize the elevated inventory levels since the second half of last year," adding, "Since NAND has higher industry inventory levels and lower profitability compared to DRAM, we will expand the existing scale of NAND production cuts."

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