Korean memory chip-maker on track for annual profit to surpass Microsoft, Alphabet

SK hynix headquarters in Icheon, Gyeonggi Province (Yonhap)
SK hynix headquarters in Icheon, Gyeonggi Province (Yonhap)

SK hynix is expected to post more than 40 trillion won ($27 billion) in operating profit for the first quarter, driven by rising memory prices and strong demand for high-bandwidth memory.

According to industry sources on Sunday, the memory chip-maker will announce its January-March earnings on April 23. Ahead of the release, local brokerages have presented estimates around the 40 trillion won mark. Heungkuk Securities projected 40.1 trillion won, Kiwoom Securities 40.3 trillion won, DS Investment & Securities 39.05 trillion won and KB Securities 40.08 trillion won.

The outlook is attributed to a combination of rising commodity DRAM prices and increased HBM shipments. NAND flash prices have also risen significantly, supported by growing demand for enterprise SSDs as North American cloud service providers expand AI server investments.

Kim Dong-won, head of research at KB Securities, said the pace of operating profit growth is expected to accelerate from the first quarter.

“The growth in operating profit is expected to enter a faster phase from the first quarter,” he said. “The structural uptrend in memory prices is likely to continue over the mid- to long-term.”

Operating margins are also expected to set new records. Market estimates suggest SK hynix could post an operating margin in the high-60 percent range, with some projections pointing to 70 percent or higher.

This implies that for every 10,000 won in sales, the company could generate around 7,000 won in operating profit, a level rarely seen in manufacturing.

If realized, SK hynix would surpass Taiwan Semiconductor Manufacturing Company in operating margin for a second consecutive quarter. TSMC is widely regarded as a benchmark for profitability in the semiconductor industry.

SK hynix recorded an operating margin of 58 percent in the fourth quarter of last year, surpassing TSMC’s 54 percent by 4 percentage points. Considering TSMC’s first-quarter guidance of 54 to 56 percent, the gap between the two companies could widen to nearly 20 percentage points.

The sharp increase in operating margins is attributed to tightening memory supply relative to demand, leading to stronger pricing power for suppliers.

While HBM has been considered a key contributor to earnings, analysts say improved profitability and higher shipments of commodity DRAM played a central role in driving the expected earnings surprise.

According to market tracker TrendForce, contract prices for commodity DRAM are projected to have increased by 90 to 95 percent quarter-on-quarter in the first quarter.

“Margins for commodity DRAM are now believed to exceed those of HBM, despite the latter’s premium positioning,” said an industry source, who requested anonymity.

Commodity DRAM includes a wide range of products, from advanced standards such as DDR5, LPDDR5X and GDDR7 to legacy DDR4, effectively referring to all DRAM excluding HBM.

Industry estimates suggest HBM accounts for about 30 percent of SK hynix’s total DRAM shipments, with the remainder consisting of conventional products.

Market expectations are also rising for the full year. Some analysts forecast that SK hynix could record annual operating profit of around 250 trillion won this year.

Kim said full-year operating profit is projected to reach 251 trillion won, up from about 47 trillion won last year. “This would exceed the operating profits of Microsoft and Alphabet, placing SK hynix fourth globally,” he said.


yeeun@heraldcorp.com