SK hynix's Q1 operating margin breaks above 70%, higher than Nvidia, TSMC

SK hynix's headquarters in Icheon, Gyeonggi Province / Yonhap

SK hynix on Thursday posted an operating profit of 37.61 trillion won ($25.42 billion) for the first quarter, nearly doubling its previous record set just three months earlier. This helped the chipmaker’s operating margin surpass 70 percent, far outpacing those of TSMC and Nvidia.

In its regulatory filing, the chipmaker said its sales stood at 52.58 trillion won and operating profit hit 37.61 trillion won during the January-March period, up respectively 198.1 percent and 405.5 percent from a year earlier.

The company's operating margin stood at 72 percent, surpassing the 58 percent posted by Taiwan’s TSMC in the first quarter and 65 percent recorded by Nvidia in the fourth quarter of last year. The two companies are widely considered the industry benchmark for profitability.

This marks a new quarterly earnings record for SK hynix, surpassing its previous all-time high set in the fourth quarter of last year — 32.83 trillion won in sales and 19.17 trillion won in operating profit.

“A seasonal slowdown is typically seen in the first quarter, but demand remained strong amid expanding investment in artificial intelligence (AI) infrastructure,” the company said.

“Expanded sales of high value-added products such as high-bandwidth memory (HBM), high-capacity server DRAM modules and enterprise solid state drives (eSSDs) drove earnings growth.”

SK hynix's 192GB small outline compression attached memory module 2 / Courtesy of SK hynix

The earnings record came amid an exponential expansion in AI infrastructure worldwide, which has fueled surging demand for AI-specific memory chips such as HBM. As memory chip makers concentrated production capacity on HBM, supply bottlenecks also emerged in conventional DRAM and even NAND flash products used for storage.

The company said demand has broadened beyond HBM into conventional DRAM and NAND more recently, as AI evolves from large-model training toward agentic AI, which requires repeated real-time inference across a wider range of service environments.

During its earnings call, the company dismissed concerns, sparked by recent declines in spot DRAM prices, that the current global memory chip upcycle may be nearing its peak.

“The spot market accounts for only a very small portion of the overall DRAM market,” the company said. “The types and volumes of products traded there also differ significantly from our business. It is difficult to view changes in the spot market as reflective of overall market conditions under the current environment … As the supply-demand imbalance is likely to persist, the memory price upcycle is expected to last longer.”

The company stressed that the imbalance stems from structural changes in the market, rather than a temporary situation. While demand is rising, the industry’s supply capacity cannot be expanded quickly due to weakened investment during the previous downturn.

To address the situation, SK hynix said customers are increasingly seeking long-term deals, and the company is “comprehensively reviewing various approaches and structural alternatives different from conventional long-term agreements.”

Regarding its HBM business, the company said it plans to supply samples of next-generation HBM4E to major clients in the second half of this year, with the goal of beginning mass production in 2027. It said the product will be based on its latest 1c process, adding that the company’s 1c technology has already “reached a mature stage in terms of yield.”

The 1c process is a sixth-generation 10-nanometer-class node, the latest process technology for fabricating memory chips. While rival Samsung Electronics has used the 1c process for its HBM4, SK hynix has used the previous 1b process for its HBM4 for manufacturing stability.

This had fueled speculation that Samsung Electronics could challenge SK hynix’s HBM dominance with HBM4, especially after Samsung in February publicly promoted itself as the world’s first company to mass-produce and ship HBM4. SK hynix is also ramping up its HBM4 production and shipment, but competition is intensifying as Samsung and Micron have also entered Nvidia’s HBM supply chain.

During the earnings call, analysts questioned SK hynix’s status on HBM4, but the company said it is “preparing to ramp up products that meet customers’ required performance levels in line with each customer’s mass production schedule.”

SK hynix said its capital expenditure this year would rise sharply from a year earlier, as it will ramp up its M15X fab in Cheongju, North Chungcheong Province, accelerate construction of its chip cluster in Yongin, Gyeonggi Province, and secure key equipment such as extreme ultraviolet lithography tools.