South Korean chip heavyweight Hynix’s revenue beats estimates as artificial intelligence lifts memory demand
- The South Korean supplier to Apple and Nvidia now expects sales for its high-end DRAM chips to more than double this year to power storage-hungry AI applications
- Sales came to 7.31 trillion won (US$5.7 billion) in the June quarter, roughly half its revenue a year ago but soundly beating an average projection for 6.05 trillion won
SK Hynix’s quarterly sales beat estimates, and the company declared surging interest in artificial intelligence (AI) was driving the beginnings of a recovery in the memory chip market.
The South Korean supplier to Apple and Nvidia now expects sales for its high-end DRAM chips to more than double this year to power storage-hungry AI applications. SK Hynix said it is gearing up to push out more of those chips, even as the company vowed to continue to slash overall output.
The chip maker’s sales came to 7.31 trillion won (US$5.7 billion) in the June quarter, roughly half its revenue a year ago but soundly beating an average projection for 6.05 trillion won. Its operating loss came to 2.88 trillion won, in line with expectations.
“The worst has passed,” said Baik Gil-hyun, an analyst at Yuanta Securities Korea.
Samsung Electronics, SK Hynix and Micron Technology have struggled for the better part of two years with a post-Covid-19 collapse in demand for the memory chips essential to smartphones, servers and computers. This month, larger rival Samsung recorded its worst decline in quarterly sales in more than a decade, while sector bellwether Taiwan Semiconductor Manufacturing Co cut its outlook and postponed production at its Arizona project to 2025, underscoring the depth of a global electronics market slump that set in after consumers and corporations trimmed spending to deal with a downturn.
“We are seeing increasing adoption of AI by major customers, and that makes us believe that a turnaround for memory is very near,” Sanjeev Rana, head of Korea Research at CLSA told Bloomberg TV.
SK Hynix will continue to invest to expand the production capacity of high-density DDR5 and HBM3 chips, chief financial officer Kim Woohyun said. Sales for graphics DRAM including HBM chips accounted for about 20 per cent of quarterly DRAM sales.
But overall demand for memory remains weak, SK Hynix warned. The company is sticking to its target to reduce capital expenditure by at least 50 per cent compared to 2022 and said it is cutting NAND production further.
The world’s No 2 memory maker indicated recovery in its traditional sales drivers would be muted, although it said the effects of production cuts will materialise in the second half. SK Hynix said it expects overall server market demand to remain soft, with only a “subdued” recovery in mobile demand. NAND shipments will remain flat in the current quarter, it said.
Expectations of a recovery in the second half buoyed optimism about an end to an unprecedented slump that has gripped the US$160 billion global memory industry, which has been sitting on months’ worth of inventory. This year, Samsung and its peers cut output to try and stabilise memory prices.
It remains unclear when the industry – infamous for its boom and bust cycles – will climb out of its sales trough. Much may depend on a fundamental Chinese economic rebound, which remains uneven. A global boom in AI could also drive demand for data centres and servers, which rely on high-density memory chips for storage.
