SK Hynix: "AI Investment and Demand Robust, Earnings to Improve in Second Half"

SK Hynix has dismissed concerns over oversupply, forecasting that major big tech companies' artificial intelligence (AI) infrastructure investments will remain robust beyond next year.

The company expects its earnings in the second half of the year to surpass those of the first half, driven by a full-scale expansion in shipments of HBM4 (sixth-generation High Bandwidth Memory).

During its second-quarter earnings conference call held today (July 29), SK Hynix addressed concerns regarding some big tech firms reviewing data center rental businesses or the emergence of high-efficiency AI models, stating, "Rather than a process of reducing investments, we view this as a process of increasing the utilization of the AI infrastructure built on a large scale so far and accelerating monetization."

"As major CSPs (Cloud Service Providers) continue their AI competition and service expansion, we believe that AI infrastructure investment will remain robust even after next year," it added.

Furthermore, SK Hynix emphasized, "Memory demand discussed with customers also reflects this trend. The production capacity (capa) expansion currently pursued by SK Hynix is based on visibility into market demand secured amid strengthened partnerships with customers."

Regarding concerns over oversupply triggered by its recently announced large-scale mid- to long-term investment, the company stated, "Since the company's capacity expansion will be carried out flexibly based on confirmed demand, the possibility that the mid- to long-term investment expansion plan will directly lead to oversupply is limited."

SK Hynix projected this year's investment scale to be in the late 40 trillion KRW range, which is more than 10 trillion KRW higher than last year.

Facility investment last year stood at 30.2 trillion KRW.

Addressing criticisms that second-quarter earnings fell short of expectations, the company explained, "It appears that the timing of the shipment expansion for some high-value-added products was carried over to the second half, and the portfolio composition affected the overall Average Selling Price (ASP)."

It then projected, "As HBM4 volumes expand in earnest and shipments of 1c nano-based general DRAM also increase, the bit growth (shipment growth rate) in the second half will record a higher level than in the first half."

It also expressed anticipation that "the ASP increase effect resulting from mix improvements will further strengthen earnings improvement in the second half."

SK Hynix explained that it plans for its third-quarter shipments to increase by about 10 percent quarter-on-quarter for DRAM and in the low single digits for NAND.

Regarding the supply status of HBM4, it stated, "We started mass production shipments to major customers in the second quarter and are currently stably expanding production capacity (ramp-up). Mass production yields and quality are showing levels close to those of the previous generation HBM3E products, which have entered a mature stage."

It also reported that sample supplies of HBM4E to customers have been completed, with the goal of full-scale mass production next year.

Regarding plans for additional domestic and overseas production capacity expansion, the company stated, "Our mid- to long-term investment direction is to carry out necessary investments in a timely manner in line with AI memory demand, while executing facility investments based on business performance and investment efficiency. However, at present, there are no specific decisions regarding additional new production infrastructure investments beyond the arbitrarily announced investment plans."

Regarding the procedure for converting American Depositary Receipts (ADRs) into domestically listed ordinary shares, SK Hynix explained, "Conversion will be possible starting from the 30th, the day after the listing of ordinary shares on the Korea Exchange is completed."

However, it added, "Considering cases of existing Depositary Receipts (DRs) of domestic companies, the issuing company may need to go through regulatory reporting procedures when converting ordinary shares into ADRs. Such procedures are expected to take typically several weeks."
※ Please note: This article was translated by AI and may contain errors.