Nvidia supplier SK Hynix reverses losses in first quarter on explosive AI demand

South Korean memory chipmaker SK Hynix reported a net profit of 1.92 trillion South Korean won ($1.39 billion) in the first quarter, reversing a 2.58 trillion won loss in the same period last year.

This was the first positive income since the third quarter of 2022, according to LSEG data. SK Hynix has reported net losses for five straight quarters due to a collapse in the memory chip market.

Revenue in the first quarter was 12.43 trillion won, up 144% over the previous year. According to LSEG data, this was the largest revenue generated since the second quarter of 2022.

SK Hynix credited the excellent performance to a “increase in sales of AI server products backed by its leadership in AI memory technology, including high-bandwidth memory” as well as efforts to drive profitability.

SK Hynix, the world’s second-largest memory chipmaker after Samsung Electronics, provides high-bandwidth memory chips for AI chipsets for firms such as Nvidia.

The growing demand for AI chipsets bolstered the high-end memory chip market, greatly benefiting companies such as SK Hynix and Samsung Electronics.

Large language models, such as ChatGPT, which has accelerated AI adoption, require a large number of high-performance memory chips because they allow these models to recall facts from previous conversations and user preferences in order to provide humanlike responses.

.To fulfill AI memory demand, the company intends to boost supply of HBM3E, the most recent type of high-bandwidth memory for AI. SK Hynix also said that it will launch 32GB Double Data Rate 5 products this year to improve its position in the high-capacity server DRAM market.

“We will continue to work towards improving our financial results by providing the industry’s best performing products at a right time and maintaining the profitability-first commitment,” Kim Woohyun, the company’s chief financial officer,

The firm expects the entire memory industry to increase steadily in the following months as demand for AI memory rises, while the conventional DRAM market will begin to rebound in the second half of 2024.

Companies stockpiled memory chips in response to the pandemic’s demand for consumer devices. However, macroeconomic worries such as inflation drove customers to reduce their purchases of such consumer products, resulting in lower demand and pricing for memory chips.

To deal with excess stockpiles, businesses such as SK Hynix reduced output of memory chips.

On Thursday morning, SK Hynix shares fell more than 4%, despite a more than 100% increase in the previous year.

Capturing AI Demand
The company has recently made announcements to meet AI demand.

The company announced on Wednesday that it aims to build a new fab in South Korea, with an estimated completion date of November 2025, to enhance production of next-generation DRAM, including HBM, to meet the growing demand for AI chips.

According to SK Hynix, the total long-term investment would be more than 20 trillion won.

SK Hynix will also collaborate with TSMC, the world’s largest contract chip manufacturer, to develop high-bandwidth memory 4 chips and next-generation packaging technologies. Mass manufacture of HBM4 chips is projected to begin in 2026.

SK Hynix will benefit from TSMC’s cutting-edge techniques, according to a statement issued April 19.