SK hynix Surpasses 9 Trillion Won, Doubles HBM Shipments... 10 Trillion Within Reach

SK hynix Ushers in the Era of 9 Trillion Won in Operating Profit
Gap with Samsung Electronics Widens Rapidly After Overtaking
Concerns Over ASP Decline Due to Intensifying HBM Competition
Maintaining Supply Chain Leadership with Overwhelming Technological Superiority

SK hynix has ushered in the era of "9 trillion won in operating profit." This achievement is the result of solidifying its leadership in the artificial intelligence (AI) semiconductor market, with high bandwidth memory (HBM) at the core. While the company is expected to maintain a dominant position in the market for the time being, intensifying competition is raising questions about the sustainability of its strong performance. The key to continued robust results will be maintaining market share based on mass production of sixth-generation HBM4 in the second half of the year.

On July 24, SK hynix announced its preliminary second-quarter results, reporting sales of 22.232 trillion won and operating profit of 9.2129 trillion won. Sales increased by 35.4% compared to the same period last year, while operating profit soared by 68.5%.

At the earnings conference call held on the same day, SK hynix President Song Hyunjong stated, "The previous quarter began with concerns about sluggish demand due to trade disputes and macroeconomic uncertainties. However, aggressive AI investments by big tech companies and continued growth in AI-related memory demand created a more favorable environment than expected," adding, "Given the anticipated demand growth from new product launches in the second half, we believe the possibility of a sharp demand decline due to inventory adjustments is low."

Since surpassing Samsung Electronics' operating profit for the first time in the fourth quarter of last year, SK hynix has continued to widen the gap. This remarkable lead is attributed to its supply advantage based on ▲early mass production of HBM3E 12-layer products, ▲expanded supply to Nvidia, and ▲proactive provision of next-generation HBM4 samples, all underpinned by technological prowess. In the case of HBM, not only is mass production technically challenging, but it also takes time to secure sufficient yield. SK hynix has not only secured the technology ahead of competitors but also established a supply chain centered on Nvidia. Although HBM accounts for only a little over 10% of total DRAM shipments, it generates more than half of the company's operating profit.

There have been calls for portfolio diversification due to the concentration on Nvidia, and the recent activities of SK Group Chairman Chey Tae-won and SK hynix President Kwak Nojeong suggest new possibilities. The two reportedly met with OpenAI CEO Sam Altman in the United States recently to discuss AI infrastructure investments and other topics. While some predict a slowdown in the AI industry, ongoing aggressive investments by governments and companies worldwide to build "sovereign AI" are expected to serve as a new driver for high-performance and high-value memory demand in the long term.

With an increasing share of HBM3E 12-layer supply, there are even "rosy outlooks" that third-quarter operating profit could surpass 10 trillion won. However, whether this dominance will continue remains uncertain. Another variable is the semiconductor tariffs announced by the United States.

Above all, the market remains consistently concerned about overheating competition in HBM and the resulting decline in average selling prices (ASP). The more competitors expand supply, the greater the likelihood that unit prices will fall. Micron has become the second supplier after SK hynix to provide Nvidia with HBM3E 12-layer products, while Samsung Electronics is also targeting mass production of HBM4 in the second half of the year.

On July 17, foreign investment firm Goldman Sachs downgraded its investment rating on SK hynix from "buy" to "neutral." In its report, Goldman Sachs analyzed that the price of HBM3E next year will fall by 30% compared to this year, and the price premium of HBM4 will remain at only 45% of the previous generation's level, leading to a temporary 8% plunge in SK hynix's stock price.

In this situation, securing yield and cost competitiveness from a technological perspective is crucial. SK hynix is confident that it has built firm market trust through a "time to market" strategy, supplying products in line with major customers' new product launch cycles. This makes it difficult for major customers such as Nvidia, which have adopted SK hynix products, to switch suppliers easily, and it works in favor of SK hynix in maintaining its pricing power.

Despite the entry of latecomers, the general consensus is that SK hynix will maintain its leading position in the HBM market for the time being. The company is also highly likely to continue its technological advantage in the HBM4 competition, which will heat up in the second half of the year. SK hynix has already disclosed that it provided HBM4 samples to major customers in March, signaling its determination to defend its market leadership. It is currently known to be collaborating with Nvidia to optimize performance.

The securities industry also expects SK hynix's strong performance to continue into the second half of the year. Ryu Youngho, a researcher at NH Investment & Securities, said, "Stock price volatility will persist until next year's HBM supply volume is finalized," but added, "We maintain our view that SK hynix will retain its leading position in terms of AI market growth and HBM cost competitiveness and technological strength."

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