[News Article] SK hynix reports earnings surprise in Q3 on AI chip boom
SK hynix reports earnings
surprise in Q3 on AI chip boom By
Jie Ye-eun, The Korea Herald - SK hynix, the world’s second-largest memory chip
maker by revenue, said Thursday it logged all-time high profit, sales and net
income in the July-September period this year, riding on the robust demand for
its artificial intelligence chips. The
company reported a quarterly operating profit of 7.03 trillion won ($5.1
billion), compared with a loss of 1.79 trillion won a year ago. The figure is
higher than the consensus of 6.76 trillion won by local analysts provided by
market intelligence FnGuide. Net
income came to 5.75 trillion won, shifting from a loss of 2.18 trillion won a
year ago, while sales jumped 93.8 percent on-year to 17.57 trillion won. Third-quarter
sales renewed the previous record of 16.4 trillion won set in the second
quarter. Operating income and net profit also surpassed the previous records of
6.47 trillion won and 4.69 trillion won, respectively, set during the
semiconductor boom in the third quarter of 2018. Meanwhile,
market watchers say SK hynix may have surpassed the operating profit of the
world’s No. 1 memory chip maker Samsung Electronics’ semiconductor business in
the July-September period. This would secure the company a dominant position in
the high-bandwidth memory market, where demand has surged with the expansion of
the AI market. Samsung’s
operating profits for the third quarter are estimated to hit 9.1 trillion won,
with the semiconductor business alone expected to contribute around 4 to 4.4
trillion won over the cited period. SK
hynix attributed the strong bottom line to demand for AI memory chips,
including HBM products and embedded solid-state drives. “Sales
focused on high-margin, value-added products increased, leading to a mid-10
percent rise in the average selling price of both DRAM and NAND compared to the
previous quarter, resulting in record-high operating profits,” an SK hynix
official said. During
the company’s earnings call held earlier in the day, SK officials said that HBM
sales grew by more than 330 percent compared to the same period last year, and
eSSD sales increased by over 430 percent. Additionally,
they expect to start shipping 12-layer fourth-generation HBM, or HBM3 chips, in
the fourth quarter, with 12-layer products making up more than half of the
total fifth-generation HBM3E chip shipments by the first half of next year. “We
will focus on investments in advanced process transitions to ensure a stable
supply of products with clear demand growth, such as HBM, DDR5 and eSSDs next
year,” said Chief Financial Officer Kim Woo-hyun. The
chipmaker also hinted that it will increase infrastructure investments next
year, with investments in the M15X fab and the first phase of the Yongin
Cluster fab projected to surpass this year’s figure of around 10 trillion won. The
M15X is expected to start contributing to DRAM production by 2026, according to
Kim. Regarding
concerns over the increase in supply from the late-coming Chinese memory companies,
the Korean chipmaker pointed out that there is a significant technological gap
between the latecomers and the leading companies like the firm. “While
price competitiveness may be more important than performance depending on the
application, the need for high-performance memory will grow as AI functionality
expands in the future,” the CFO said. “We’ll focus on the high-value-added
market to maintain the gap with latecomer firms." Market
watchers say SK hynix will likely break its all-time annual record this year.
The company’s previous annual records were 44.62 trillion won in revenue set in
2022 and 20.84 trillion won in operating profit set in 2018. This year’s
estimated annual averages are significantly higher, with revenue projected at
66.66 trillion won and operating profit at 23.06 trillion won. Daishin
Securities analyst Shin Seok-hwan said, "SK hynix’s operating profit is
expected to rise to 23.1 trillion won in 2024 and 35.5 trillion won in 2025,
with 12-layer HBM3E chip shipments starting to increase from the fourth quarter
of this year." "While
initial costs may have some impact in the fourth quarter, the contribution to
profits is expected to grow meaningfully as the supply of 12-layer HBM3E
expands from next year,” he added. Following
the upbeat earnings report, SK hynix shares closed 1.12 percent higher than the
previous day to close at 198,200 won on Thursday. Source:
https://www.koreaherald.com/view.php?ud=20241024050549
2024.10.25
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