SK hynix leads AI memory market with record Q3 earnings
Participants visit SK hynix's booth at SEDEX 2024 semiconductor exhibition at COEX in southern Seoul, Wednesday. Yonhap
SK hynix announced record-high quarterly earnings in the third quarter of this year, Thursday, fueling expectations that it could overtake Samsung Electronics as Korea's most profitable chipmaker by the end of this year.
SK hynix's earnings
Revenues reached 17.57 trillion won ($12.72 billion) during the July-to-September period, up 93.8 percent year-on-year, while operating profit stood at 7.03 trillion won, swinging to the black from a 1.79 trillion won operating loss a year ago. Operating profit margin climbed to an impressive 40 percent.
These figures represent SK hynix's highest-ever quarterly performance. Revenues rose to a new peak after reaching 16.42 trillion won in the second quarter. Operating profit significantly surpassed the 6.47 trillion won achieved in the third quarter of 2018, when the semiconductor industry was in a lucrative upcycle.
Earlier this month, rival chipmaker Samsung Electronics projected an operating profit of 9.1 trillion won for the third quarter, with the market estimating that earnings from its chip businesses would range from 4 trillion won to 4.4 trillion won.
Given SK hynix's strong earnings in recent quarters and positive expectations for the fourth quarter, the company is poised to overtake Samsung Electronics and become Korea's most profitable chipmaker when the yearly results are tallied at the end of the year.
A visitor points to SK hynix's AI accelerator AiMX displayed at SEDEX 2024 semiconductor exhibition at COEX in southern Seoul, Wednesday. Yonhap
SK hynix's growth is driven by the rising demand for high bandwidth memory (HBM) chips, which are essential for powering artificial intelligence (AI) processors.
“Strong demand for AI memory continued among datacenter customers, prompting the company to expand sales of high-value products like HBM and eSSD, which contributed to achieving the highest revenue in its history,” the company said during a conference call.
“Sales of HBM increased by 70 percent from the second quarter and 330 percent from the third quarter of last year, driving the company’s overall sales growth,” SK hynix added.
SK hynix noted that HBM comprised 30 percent of total sales in the third quarter and is projected to increase to 40 percent in the fourth quarter. The company said the shipping volume of fifth-generation HBM3e chips has surpassed that of fourth-generation HBM3 during the third quarter.
Deliveries of advanced 12-layer HBM3e chips are expected to proceed as scheduled in the fourth quarter. These 12-layer products are anticipated to make up more than half of the total HBM3e chips produced in the first half of next year.
SK hynix's 12-layer HBM3e / Courtesy of SK hynix
The 12-layer HBM3e chip is recognized as the most advanced HBM semiconductor currently in mass production. In September, SK hynix became the first in the industry to mass-produce these chips.
The company provided an optimistic outlook for its HBM business next year, noting that it has already finalized discussions on delivery terms and pricing with customers. Chief Financial Officer Kim Woo-hyun said demand is expected to exceed initial projections due to clients’ investments in AI processors.
“We expect upside movements in demand and downside movements in supply, meaning demand will remain outpacing supply next year,” Kim said. “This is why we believe customers are looking to establish long-term supply contracts for HBM.”
SK hynix acknowledged that while it is investing to meet next year's demand, it is facing limitations in manufacturing capacity. To address this, the company plans to reduce legacy manufacturing processes, such as those for HBM3 and DDR4 chips, and expand its capacity for producing HBM3e chips.