The Korea Herald


SK hynix to boost investment in HBM, DDR5 chips

By Jie Ye-eun

Published : Oct. 26, 2023 - 15:56

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An aerial view of SK hynix's semiconductor line in Icheon, Gyeonggi Province. (SK hynix) An aerial view of SK hynix's semiconductor line in Icheon, Gyeonggi Province. (SK hynix)

SK hynix, the world’s second-largest memory chip maker, said Thursday that it plans to boost its investment in high-value DRAM chips such as High Bandwidth Memory and DDR5, in line with the growth of the artificial intelligence market.

“The capital expenditure for next year will increase compared to this year. … We’ll minimize the expansion by considering investment efficiency and financial stability,” Kim Woo-hyun, vice president and chief financial officer at SK hynix, said at the company’s earnings conference the same day.

Earlier, the memory chip maker announced its plan to halve its capital spending this year, compared to last year’s 19 trillion won ($13.9 billion), amid the chip industry downturn.

“Within the limit of the (investment) amount this year, we’re adjusting capital expenditure investment according to product priorities,” he said. “We’ll focus more on conversing process rather than increasing production capacity next year and operate our business based on capital expenditure efficiency.”

SK will step up its game in deploying the advanced chipmaking process node for high-value DRAM products, which is likely to lead to rising demand in the following year. The company, however, will maintain a conservative production stance for NAND, which is still at a high inventory level.

The CFO said the company will put effort into expanding the proportion of the fourth and fifth generations of 10-nano levels, to take over half of its DRAM production by the end of next year. However, a “considerable period” will be required to reach the last fourth quarter’s capacity level, at the start of which the firm had carried out a production cut, he said.

SK also boasted confidence in leading the HBM market, while forecasting its average annual growth to mark 60 to 80 percent over the next five years.

"Next year's capacity for both of our HBM3 and HBM3E chips have been sold out already. According to our clients and market watchers, our HBM3 capacity share is overwhelmingly high," said Park Myung-soo, the head of DRAM marketing at SK hynix, highlighting that the firm becoming a leading HBM3 manufacturer was "clearly visible."

Before Thursday's earnings call, the memory chip maker released its quarterly earnings reports for the July-September period before the opening of the Korea Exchange.

SK said its third-quarter operating losses came to 1.79 trillion won on a consolidated basis, compared with a profit of 1.67 trillion won a year ago. The loss was slightly higher than the consensus of 1.65 trillion won by local analysts provided by market intelligence firm FnGuide.

The company's net losses marked 2.18 trillion won, widening the deficit as it logged a net profit of 1.1 trillion won a year earlier. Sales also decreased 17.5 percent on-year to 9.06 trillion won over the cited period.

However, it marked a turnaround of the DRAM business following two quarters of losses.

SK attributed a 24 percent on-quarter increase in sales and a 38 percent on-quarter decrease in operating loss to the strong sales of its flagship chip products, including HBM3 and high-capacity DDR5.

"As market demand for our high-performance memory products continued to rise, our performance has improved steadily after hitting the bottom line in the first quarter," an SK hynix official said.

"Above all, it is significant to see our DRAM business, which recorded a loss in the first quarter of this year, record a surplus after two quarters," the official added.

Despite SK hynix's recovery in the DRAM business, the memory chip maker's shares shed 5.88 percent from the previous session's close to end trading at 120,000 won on Thursday.