SK Hynix Secures Half of Production Capacity for Next Two Years, Countering AI Peak Debate

SK Hynix has once again pushed back against concerns that the artificial intelligence (AI) boom has peaked by breaking its all-time record performance in the third quarter of this year.

Analysts note that the company has substantially demonstrated mid- to long-term memory demand by already securing more than half of its production volume for next year and the year after through long-term supply agreements (LTAs).

SK Hynix posted 104 trillion 615.5 billion won in revenue and 83 trillion 338.8 billion won in operating profit for the third quarter of this year, surpassing 100 trillion won in quarterly revenue for the first time in its history.

Both revenue and operating profit exceeded market expectations.

SK Hynix has been breaking its record-high performance for six consecutive quarters since the second quarter of 2025.

Compared to its revenue of 22 trillion 232 billion won and operating profit of 9 trillion 212.9 billion won at that time, revenue has surged about 4.7 times and operating profit about 9 times over the span of a year and a half.

The operating profit margin for the third quarter of this year also rose by 4 percentage points from the previous quarter (76%) to 80%, setting a new all-time high.

Industry observers evaluate this level as difficult to find in the manufacturing sector.

SK Hynix's latest earnings were announced amid a reignited sense of crisis that semiconductor demand has passed its peak due to concerns over the profitability of AI investments.

Weighed down by unfavorable factors originating from China, such as CXMT's technological catch-up, and talks of major tech companies adjusting the pace of their AI investments, SK Hynix's stock plummeted by 24.3% over the span of a week from October 12 to 16.

This marked the largest weekly drop in history since the 2008 financial crisis (-31.9%).

Consequently, the market had been watching SK Hynix's third-quarter earnings as a key indicator to verify the robust condition of the AI industry.

SK Hynix's strong performance is attributed to expanded sales of high-bandwidth memory (HBM) and rising prices for legacy DRAM.

As shipments of NVIDIA's next-generation AI accelerator, Vera Rubin, get into full swing, HBM4 revenue began to be reflected, while contract prices for legacy DRAM rose by about 13% to 18% compared to the previous quarter, maintaining a supplier-favored market.

SK Hynix also expanded its long-term supply agreements (LTAs) to enhance mid- to long-term demand visibility and solidify its growth foundation.

The company has currently signed LTAs with 14 major global CSPs (cloud service providers) and is discussing the extension of contract periods, which are typically five years, with some customers.

LTA volumes secured so far account for more than 50% of the total production capacity for 2027 – 2028.

In response to soaring HBM demand, SK Hynix plans to maximize the production capacity of Cheongju M15X by the end of the year.

It expects HBM4 shipments and revenue to surpass those of the previous generation, HBM3E, in the fourth quarter of this year, establishing itself as the flagship product.

In addition, to expand product competitiveness, the company plans to strengthen its high-value product portfolio by increasing the proportion of the 1-nanometer-class 6th generation (1c) process and boosting sales of DDR6 and LPDDR5 SOAMM for AI servers.

Next year, starting with the full-scale operation of the Yongin Fab 1, the company is expected to expand domestic and overseas infrastructure investments, significantly increasing its investment scale compared to this year.

Last August, construction began on a next-generation HBM advanced packaging plant in Indiana, USA.

The goal is to mass-produce next-generation HBM products starting in the second half of 2029.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.