Nvidia supplier SK Hynix reversed losses in the first quarter on exploding AI demand

Nvidia supplier SK Hynix reversed losses in the first quarter on exploding AI demand

South Korean memory chip maker SK Hynix on Thursday reported 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 posted in the same period a year ago.

This was the first positive earnings recorded since the third quarter of 2022, LSEG data showed. SK Hynix posted a net loss for five consecutive quarters from a downturn in the memory chip market.

Revenue in the first quarter totaled 12.43 trillion won, up 144% from a year ago. This is the highest result recorded since the second quarter of 2022, according to LSEG data.

SK Hynix attributed the strong performance to “an increase in sales of AI server products supported by its leadership in AI memory technology including high-bandwidth memory” as well as efforts to drive profitability.

SK Hynix is the world’s second largest memory chipmaker after Samsung Electronics and supplies high-bandwidth memory chips that meet the needs of AI chipsets for companies such as Nvidia

High demand for AI chipsets boosts the high-end memory chip market, benefiting players such as SK Hynix and Samsung Electronics.

Large language models like ChatGPT – which is causing AI adoption to skyrocket – require lots of high-performance memory chips because they allow the model to remember details from past conversations and user choices to generate human-like responses.

To meet AI memory demand, the firm said it plans to increase supply of HBM3E – the latest generation of high-bandwidth memory for AI. SK Hynix said it will also introduce a 32GB Double Data Rate product this year to strengthen its leadership in the high-capacity server DRAM market.

“We will continue to work towards improving our financial results by providing the industry’s best-performing products at the right time and maintaining our commitment to prioritizing profits,” said Chief Financial Officer Kim Woohyun.

The firm projects that the overall memory market will grow steadily in the coming months amid increasing demand for AI memory, while the conventional DRAM market will begin to recover from the second half of 2024.

Pandemic-induced demand for consumer electronics is causing companies to stockpile memory chips. But macroeconomic uncertainties such as inflation cause consumers to cut back on those consumer goods, reducing demand and prices for memory chips.

To deal with excess inventory, companies such as SK Hynix are reducing their production of memory chips.

Shares of SK Hynix fell more than 4% on Thursday morning, although in the past year, they have surged more than 100%.

Capturing AI requests
The firm has made recent announcements to meet AI demand.

The firm on Wednesday said it plans to build a new fab in South Korea, with an estimated completion date set for November 2025, to ramp up production of next-generation DRAMs including HBM to capture growing demand for AI chips.

The total investment will amount to more than 20 trillion won in the long term, SK Hynix said.

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