By Heekyong Yang and Joyce Lee
SEOUL, April 23 (Reuters) – South Korea’s SK Hynix on Thursday set a record for quarterly profit with a five-fold jump in earnings and forecast AI chip demand would exceed manufacturing capacity, allaying concern about slowing AI spending by big tech firms.
The outlook by the Nvidia supplier signals strong momentum remaining intact for high bandwidth memory chips used in AI chipsets, keeping supplies constrained and prices high.
“Client requests for (HBM) chip supplies over the next three years already far exceeds our production capacity,” Ki Tae Kim, head of HBM sales and marketing, said on an earnings call.
The world’s second-largest memory chipmaker after Samsung Electronics also said it sees limited impact from war in the Middle East, having secured inventory and diversified suppliers of key chemicals, and securing energy through long-term contracts, minimising the impact of price volatility.
CHIP PRICE RALLY SEEN EASING
Contract prices for certain DRAM chips jumped nearly 83% in the first quarter from the previous quarter, while prices for some NAND products soared around 160%, showed data from market tracker TrendForce. It expects prices to rise in the current quarter, signalling another quarter of robust earnings growth, as tech firms race to secure chips for AI infrastructure.
The pace of price increases may begin to ease after the second quarter, but constrained supply will continue until new production capacity comes online, which can take more than a year after construction begins, analysts said.
SK Hynix said it expects a favourable pricing environment to continue “for the time being” as AI-driven demand offsets softer demand from PC and smartphone makers.
Chey Tae-won, chair of parent group SK Group, last month said a global chip wafer shortage is likely to persist until 2030, as demand driven by AI outpaces supply.
SK Hynix said earlier it is accelerating capacity expansion, including bringing forward the opening of a chip plant in South Korea to meet surging demand.
The chipmaker said investment this year will rise significantly from last year’s 30.2 trillion won ($20.37 billion), with a focus on building infrastructure at the Yongin Cluster, ramping up the M15X fab, and securing key equipment.
In March, SK Hynix said it would purchase 11.95 trillion won worth of EUV lithography tools from ASML by 2027.
The chipmaker also said it is reviewing shareholder return measures, including dividends, share buybacks and cancellations, and aims to finalise plans within the year.
SK Hynix reported a 37.6 trillion won operating profit for January-March, from 7.4 trillion won a year earlier.
That was in line with a 37.9 trillion won LSEG SmartEstimate, which is weighted toward analysts who are more consistently accurate.
Quarterly revenue rose 198% to 52.6 trillion won.
SK Hynix’s share price was up 2.1% in morning trade, compared with the benchmark KOSPI’s 1.2% rise.
The stock has jumped nearly 90% so far this year, with a market value climbing to about $590 billion, surpassing the $570 billion of ASML Europe’s most valuable company.
($1 = 1,482.6000 won)
(Reporting by Heekyong Yang and Joyce Lee; Editing by Miyoung Kim, Lincoln Feast and Christopher Cushing)
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