Chip Maker SK Hynix Posts Record Quarter as AI Memory Demand Overwhelms Supply

SK Hynix achieved a record quarter, with its quarterly revenue surpassing 100 trillion won for the first time. The chipmaker projects that memory demand will surpass supply through 2030, noting that its DRAM and HBM volumes are sold out until 2029.

The South Korean memory chip maker reported third-quarter results on Wednesday. Revenue reached 104.6 trillion won (nearly $78 billion), and operating profit was 83.3 trillion won ($65.5 billion), according to its earnings release. This marked the first instance its quarterly sales exceeded 100 trillion won ($74.5 billion).

Revenue increased by 328% compared to the prior year, and operating profit rose 632%, resulting in an operating margin of 80%. Analysts surveyed by Bloomberg had anticipated an operating profit of 77.5 trillion won. Net income amounted to 39.8 trillion won, showing a 216% increase from one year ago, though it was down 58% from the second quarter.

CFO Kim Woo-hyun attributed the net income dip to net non-operating expenses totaling 32.6 trillion won. These expenses included an 11.6 trillion won currency loss and a 22.9 trillion won valuation loss on investments.

SK Hynix informed investors that memory demand will continue to outpace supply through 2030, and its DRAM and HBM volumes through 2029 are effectively sold out. DRAM is the standard memory for PCs, phones, and servers, while HBM is stacked memory utilized next to AI processors for data feeding.

Kim Woo-hyun stated, “Given the complexities involved in implementing leading-edge processes and the lead times required to construct new production facilities,” that a situation where supply cannot keep up with demand is projected to continue through 2030.

The company mentioned that some customers recently adjusted their HBM specifications, which SK Hynix interprets as evidence of overwhelming demand, as these customers must build more AI accelerators from a limited supply of chips. The firm stated on the call, “Demand remains so strong that customers’ volume requirement is more than double that of what we can supply today.”

To secure this demand, SK Hynix has executed long-term agreements with 14 key customers, including major global cloud providers. These agreements reserve chip volumes years ahead and cover over 50% of the company’s production capacity for 2027 and 2028.

CEO Kwak Noh-Jung responded to a question regarding confidence in AI investment, noting that major cloud customers reported year-over-year cloud revenue growth ranging from 30% to 80%, and cloud order backlogs doubled to five-fold. He added that AI spending is expanding beyond a few large tech firms to include sovereign AI projects and on-prem setups.

SK Hynix anticipates weaker demand from PC and smartphone makers due to higher memory prices and tight supply, but believes AI infrastructure demand should compensate for any decline.