SK Hynix Maintains Legacy-Centered Production Cuts... "Memory Market Conditions Will Continue to Improve"

SK Hynix Q4 Earnings Announcement
Maintains Production Cut Strategy Focused on Legacy Products
Increases High-Value Product Output but Growth Rate Remains Low
"Memory Industry Production Growth Rate in Single Digits"

SK Hynix has decided to increase the production of high value-added products, including High Bandwidth Memory (HBM), while continuing to reduce the output of legacy products. Although the semiconductor market is recovering this year, and memory production is also increasing, the growth rate is expected to be in the single digits and thus minimal, so it is not anticipated to significantly impact the recovery trend of the industry.

SK Hynix Icheon Campus Entrance / Photo by SK Hynix

Kim Woo-hyun, Chief Financial Officer (CFO) of SK Hynix, stated during a conference call following the announcement of the fourth-quarter results on the 25th, "With demand recovering this year and the industry's inventory levels normalizing from the supply side, the scale of production cuts is expected to be gradually adjusted." He added, "However, production of legacy products, which required cuts, will continue to decline, and production will increase mainly for premium products that require advanced processes and have rising demand, so the overall production increase will be limited."

Some have expressed concerns that the shift in the memory industry's production cut policy and the increase in production volume could bring the semiconductor market recovery to a close faster than expected. Regarding this, CFO Kim said, "The production cuts carried out by the industry since the end of last year were mainly focused on low-profit legacy products with high inventory." He added, "Production cuts will be maintained until the inventory of these products is sufficiently depleted and prices reach a level that ensures profitability."

He continued, "This year, suppliers are expanding production of high-performance, high-capacity Double Data Rate 5 (DDR5), Low Power Double Data Rate 5 (LPDDR5), and HBM, which are high value-added products with increasing customer demand." He explained, "These products have larger die sizes compared to legacy products subject to production cuts, and especially HBM has a die size approximately twice that of DDR products with the same capacity, so even if wafer input for HBM increases, the growth rate of finished product output will be relatively limited."

He also said, "SK Hynix has maintained the principle of increasing supply for products with high demand and not increasing production for products with low demand." Considering these industry trends and the company's plans, he forecasted, "The production growth rate this year is expected to be limited, and the memory market will continue to improve." In this context, he also predicted that "the memory industry's production growth rate this year will be in the single digits despite the recovery in utilization rates, as production increases focus on high value-added products."

Industry inventory is expected to normalize within the year. Kim Seok, Head of NAND Marketing at SK Hynix, said, "By the end of the year, inventory levels for both customers and suppliers will be reduced to lean levels." He added, "We plan to maintain a conservative production stance until inventory normalization, with DRAM reaching normal levels in the first half of the year and NAND in the second half." Kim Gyu-hyun, Head of DRAM Marketing at SK Hynix, shared the same outlook, explaining that "depending on supply and demand conditions, the memory market's upward trend may continue into next year."

SK Hynix expects that while the production growth rate will remain in the single digits this year, demand for DRAM and NAND flash will grow by the mid-to-high teens percentage range. Demand is increasing across all applications, including PC, mobile, and server markets, and the effect of artificial intelligence (AI) is expected to further accelerate shipment growth. In particular, with the advent of the on-device AI era this year?where AI functions are implemented on devices without network connectivity?related demand is expected to rise through next year.

Regarding concerns about investment burdens that may arise as factory operations tighten during the memory upturn period, SK Hynix plans to maximize the use of existing assets under a conservative investment policy. CFO Kim stated, "We plan to expand investment focused on products with clear competitive advantages." He added, "For the next several years, we will utilize the remaining space in our current M15 and M16 fabs." He further explained, "Rather than investing to increase capacity as in the past, we will focus on conversion investments to provide value and make the most efficient use of cleanroom space."

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