Artificial intelligence

Nvidia Supplier SK Hynix Announces A $1.39 Billion Profit On AI Demand

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

TakeAway Points:

  • SK Hynix reported a 1.92 trillion South Korean won net profit on Thursday after posting net losses for five straight quarters.
  • According to LSEG data, this was the first positive income reported since the third quarter of 2022
  • A “rise in the sales of AI server solutions backed by its leadership in AI memory technology, including high-bandwidth memory” and initiatives to boost profitability were SK Hynix’s explanations for the impressive performance.

SK Hynix Recorded 1.92 Trillion Profit

According to LSEG data, this was the first positive income reported since the third quarter of 2022. SK Hynix experienced five straight quarters of financial losses as a result of the memory chip market downturn.

Revenue increased by 144% from the previous year to 12.43 trillion won in the first quarter. LSEG data indicates that this was the biggest revenue recorded since the second quarter of 2022.

The impressive result was attributed by SK Hynix to efforts to boost profitability as well as “an increase in the sales of AI server solutions backed by its leadership in AI memory technologies, including high-bandwidth memory.”

SK Hynix Remains the Second-largest Memory Chip 

After Samsung Electronics, SK Hynix is the second-largest memory chip manufacturer in the world. It provides high-bandwidth memory chips that are used in AI chipsets made by businesses like Nvidia.

Players in the high-end memory chip market, such as SK Hynix and Samsung Electronics, benefited greatly from the sector’s surge in demand for AI chipsets.

Large language models, like ChatGPT, which led to a sharp increase in the use of AI, need a large number of high-performance memory chips in order to remember user preferences and details from previous talks in order to provide responses that are human-like.

The company stated that it intends to enhance supply of HBM3E, the most recent generation of high-bandwidth memory for AI, in order to meet the demand for AI memory. To maintain its dominance in the high-capacity server DRAM market, SK Hynix announced that it will also launch 32GB Double Data Rate 5 products this year.

“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, Chief Financial Officer, said .

According to the company, the demand for AI memory will continue to drive steady growth in the memory industry in the upcoming months, while the market for traditional DRAM will begin to rebound in the second half of 2024.

Companies began hoarding memory chips as a result of the pandemic-induced demand for consumer devices. However, customers reduced their purchases of these consumer items due to macroeconomic uncertainties like inflation, which lowered memory chip prices and demand.

To handle the excess stockpiles, companies like SK Hynix halted manufacturing of its memory chips. SK Hynix shares plummeted more than 4% on Thursday morning, yet in the last year, they have soared more than 100%.

Meeting the Need for AI

The company has recently announced plans to address the demand for AI.

The company announced on Wednesday that it intends to construct a new fab in South Korea, with an estimated completion date of November 2025, in order to boost production of next-generation DRAM, which includes HBM, in order to meet the growing demand for AI chips.

According to SK Hynix, the entire investment would eventually total more than 20 trillion won. In order to develop next-generation packaging technology and high-bandwidth memory 4 chips, SK Hynix is also collaborating with TSMC, the largest contract chip manufacturer in the world. The HBM4 chips are anticipated to go into mass production in 2026.

A statement released on April 19 states that SK Hynix will benefit from TSMC’s cutting-edge procedures.

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