SK Hynix Inc banner. At the company's office in Seongnam, South Korea, on Monday, April 22, 2024. SK Hynix is scheduled to release earnings numbers on April 25. Photographer: SeongJoon Cho/Bloomberg via Getty Images
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South Korean memory chip maker SK Hynix on Thursday reported net profit of 1.92 trillion South Korean won ($1.39 billion) in the first quarter, reversing a loss of 2.58 trillion won recorded in the same period last year.
This is the first positive income recorded since the third quarter of 2022, LSEG data showed. SK Hynix has posted net losses for five consecutive quarters of stagnation in the memory chip market.
Revenue in the first quarter reached 12.43 trillion won, an increase of 144% from a year ago. This was the highest revenue recorded since the second quarter of 2022, according to LSEG data.
SK Hynix attributed the strong performance to “an increase in sales of AI server products supported by its leadership in AI memory technology, including high-bandwidth memory” as well as efforts to increase profitability.
SK Hynix is the world's second largest memory chip manufacturer after Samsung Electronics and provides high-bandwidth memory chips that meet the AI chip needs of companies such as Nvidia.
The huge demand for AI chips has boosted the high-end memory chip market, greatly benefiting players such as SK Hynix and Samsung Electronics.
Large language models like ChatGPT – which have caused increased adoption of AI – require a lot of high-performance memory chips as these chips allow these models to remember details from previous conversations and user preferences in order to generate human-like responses.
To meet demand for AI memory, the company said it plans to increase the supply of HBM3E memory – the latest generation of high-bandwidth memory for AI. SK Hynix said it will also introduce 32GB Double Data Rate 5 products this year to strengthen its leadership in the high-capacity server DRAM market.
“We will continue to work to improve our financial results by providing the best-performing products in the industry on a timely basis and maintaining our profitability-first commitment,” said CFO Kim Woo-hyun.
The company expects the overall memory market to grow steadily in the coming months amid rising demand for AI memory, while the traditional dynamic memory market will begin to recover from the second half of 2024.
Pandemic-induced demand for consumer electronics has companies stockpiling memory chips. But macroeconomic uncertainties, such as inflation, have led consumers to reduce their purchases of these consumer goods, resulting in a decline in demand for and prices for memory chips.
To address excess inventory, companies like SK Hynix have reduced production of their memory chips.
SK Hynix shares fell more than 4% Thursday morning, even though they have jumped more than 100% over the past year.
Capture demand for artificial intelligence
The company has made announcements recently to meet the demand for artificial intelligence.
The company said on Wednesday that it plans to build a new factory in South Korea, with an estimated completion date of November 2025, to ramp up production of next-generation DRAM including HBM to meet growing demand for artificial intelligence chips.
SK Hynix said the total investment will reach more than 20 trillion won in the long term.
SK Hynix is also collaborating with TSMC, the world's largest chip manufacturer, to build 4 high-bandwidth memory chips and next-generation packaging technology. Mass production of HBM4 chips is expected to begin from 2026.
SK Hynix will benefit from TSMC's leading operations, according to an April 19 statement.
