SK hynix posts record Q3 profit as AI demand fuels surge

SK hynix reported its highest quarterly profit for the July-September period this year, surpassing market consensus by a large margin, driven by its competitive edge in AI memory chips.

SK hynix's Icheon headquarters [YONHAP]

SK hynix reported its highest-ever quarterly profit for the July-September period this year, surpassing the market consensus by a large margin, driven by its competitive edge in AI memory chips.

The Korean chipmaker, a supplier to Nvidia, announced Thursday that it had returned to profitability in the third quarter, reporting 7 trillion won ($5 billion) in profit compared to a 1.8 trillion won loss from a year ago.

The market consensus for the third quarter profit had been 6.8 trillion won, according to data compiled by FnGuide.

The world's second-largest memory chipmaker also posted record-breaking quarterly revenue of 17.6 trillion won, a staggering 94 percent increase from the previous year.

“Demand for AI memory remained strong, particularly among data center customers, and the company achieved its highest revenue since its foundation by expanding sales of premium products such as HBM [high bandwidth memory] and eSSD,” the company said in a statement.

“In particular, HBM sales showed exceptional growth, up more than 70 percent from the previous quarter and more than 330 percent from the same period last year.”

SK hynix’s better-than-expected earnings are compared to an estimated four to five trillion won in profit generated by Samsung Electronics' chip business division for the third quarter of this year.

The boost in the chipmaker's profit was derived largely from high demand for its premium HBM chips that achieved a sellout for next year, according to the company. HBM is premium type of dynamic random-access memory (DRAM) chip that's three to five times more expensive than commodity DRAMs.

SK hynix is currently a sole supplier of eight-high HBM3E, the fifth generation of the type, to Nvidia, an AI chip goliath. It was also the first to mass-produce the 12-high HBM3E product in September. Its crosstown rival, Samsung Electronics, is still in the process of verification for both products with Nvidia.

SK hynix said it would continue the leading momentum for the next version of the chip.

“The 12-high HBM3E product will start shipping out to clients in the fourth quarter, and its sales will take up more than half our total HBM3E products in the first half of next year,” the company said during a conference call.

“We will leverage our strength in 1b nanometer technology, which has proven its stable mass production and high performance, minimizing errors that could break out in the mass-production process.”

HBM sales that accounted for 30 percent of the entire DRAM sales in the third quarter are expected to reach 40 percent in the fourth quarter for SK hynix, the chipmaker said.

SK hynix said it will bump up its capital expenditure this year from the previously planned figure, to the “mid-to-late 10 trillion range,” responding to rising demand for HBM and building its M15X fabrication plant in Cheongju, North Chungcheong, which is slated for completion in the latter half of 2025.

“Capital expenditure next year will also increase by a thin margin,” it said.

SK hynix shares closed at 198,200 won Thursday, 1.12 percent up from the previous trading day.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]