SK hynix to double HBM investment as AI chip demand grows

[Photo by Yonhap]

SK hynix Inc. will expand its facility investment for high-bandwidth memory (HBM) production in response to increased demand for high-performance products, according to the company.

The South Korean chipmaker intends to more than double the investment in facilities related to through-silicon via (TSV), essential for HBM production, compared to 2023 and is also poised to commence production of its 5th generation product, HBM3E, in the first half of 2024.

SK hynix posted 11.31 trillion won ($8.46 billion) in sales revenue and 346 billion won in operating profits in the fourth quarter of 2024, as disclosed on Thursday, marking a turnaround to profitability after posting operating losses for five consecutive quarters.

This return to profitability is primarily attributed to the strong sales of HBM3 and double data rate 5 (DDR5). SK hynix’s sales of DDR5 and HBM3 in 2023 increased more than fourfold and fivefold respectively compared to the previous year. To continue this upward trend, SK hynix plans to start mass production of the AI chip, HBM3E, and accelerate the development of the 6th generation HBM4.

“Our HBM3E products are expected to experience substantial demand in 2024, with mass production scheduled in the first half of the year. We intend to double the TSV production capacity in response to this demand,” the company said during a conference call. Regarding additional investments, the company also expressed the more cautious stance of deciding “after careful consideration of long-term demand, market conditions, and supply chain status.”

The chipmaker plans to prepare for MCRDIMM, a high-capacity server module which combines multiple DRAMs on a substrate, and LPCAMM2, a high-performance mobile module based on low-power (LP) DDR5X, to target both AI server demand and on-device AI markets.

While increasing production with a focus on high-value-added products, SK hynix aims to minimize capital expenditure (CAPEX) growth, emphasizing stable business operations. “We reduced investments by over 50 percent compared to the previous year to address weakened demand. Our strategy for 2024 is to maintain a conservative approach, concentrating on areas that ensure growth and profitability, while avoiding a cycle where increased investment leads to oversupply,” Chief Financial Officer Kim Woo-hyun said.

SK hynix explained that it has been maintaining a conservative production stance, including reductions, leading to its sales exceeding production since the third quarter of 2023 and subsequent improvements in inventory levels. “We will uphold a conservative production stance until achieving inventory normalization in 2024 while anticipating that DRAM will stabilize in the first half and NAND flash in the second half of the year,” the company said.

Analysts project the chipmaker’s operating profit to hit nearly 10 trillion won in 2024. DS Investment & Securities Co. analyst Lee Soo-rim forecasts a 10.6 trillion won operating profit, citing the expected increase in demand for AI chips.