SK Hynix Reports Record Q1 Profit Amid AI Memory Chip Demand
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SK Hynix, a supplier to Nvidia, reported a more than five-fold increase in its first-quarter operating profit, reaching a record high. The strong results were driven by soaring demand for advanced and conventional memory chips, fuelled by the artificial intelligence (AI) boom.
The South Korean chipmaker's operating profit for the January-March period was 37.6 trillion won (approximately 25.42 billion USD), a significant rise from 7.4 trillion won (approximately 5 billion USD) a year earlier. This figure aligned with a 37.9 trillion won forecast by LSEG SmartEstimate.
Quarterly revenue for SK Hynix also surged by 198% to 52.6 trillion won (approximately 35.57 billion USD). The robust performance highlights sustained momentum in the global memory chip market.
Large technology organisations building AI data centres have created constrained chip supplies, pushing up prices for both high-end and commodity memory chips. SK Hynix expects a favourable pricing environment to continue "for the time being," as AI-driven demand offsets softer chip demand from personal computer and smartphone manufacturers.
Data from market tracker TrendForce showed contract prices for certain DRAM chips jumped nearly 83% in the first quarter from the prior quarter. Prices for some NAND products soared around 160% during the same period.
TrendForce anticipates further increases in memory chip prices in the current quarter, suggesting continued strong earnings growth as AI firms secure advanced chips for their infrastructure rollouts. Some analysts project that while the pace of price increases may slow after the second quarter, supply constraints will persist until new production capacity becomes available, which can take over a year after construction commences.
Chairman Chey Tae-won of parent group SK Group previously stated that the global chip wafer shortage is likely to continue until 2030, with AI-driven demand surpassing supply. SK Hynix is accelerating its capacity expansion efforts.
This includes bringing forward the opening of a new memory chip plant in South Korea to meet the surging demand. The chipmaker announced that this year's investment will significantly exceed last year's 30.2 trillion won.
Investment will focus on developing infrastructure at the Yongin Cluster, ramping up the M15X fab, and acquiring key equipment like extreme ultraviolet (EUV) lithography tools. In March, SK Hynix confirmed a purchase of 11.95 trillion won worth of EUV lithography tools from ASML by 2027.
The company is also reviewing additional shareholder return measures, including dividends, share buybacks, and cancellations. It aims to finalise implementation plans within the year.
Shares in SK Hynix have risen nearly 90% so far this year, with its market value climbing to around 590 billion USD. This valuation surpasses ASML's 570 billion USD, making SK Hynix more valuable than Europe's largest company.
Shares of SK Hynix were trading up 2.1% in morning trade, compared with the benchmark KOSPI's 1.2% rise.
SK Hynix reported a record first-quarter operating profit, driven by high demand for memory chips fuelled by artificial intelligence.
Operating profit was 37.6 trillion won (approximately 25.42 billion USD), a substantial increase from the previous year.
Memory chip prices, including DRAM and NAND, saw significant jumps in the first quarter, with further increases expected due to constrained supply.
Source: REUTERS
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