SK Hynix Shatters Expectations with $5.1 Billion Profit, Foresees Strong Memory Chip Demand
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SK Hynix (HXSCL, Financial), the chip maker from South Korea, posted an operating profit of 7.03 trillion won ($5.1 billion) for the third quarter 2024, and revenues were nearly double the expectation. In particular, the firm is expecting DRAM and NAND flash memory chips demand to grow in the mid- to high teens by 2025, which is a positive outlook for the semiconductor.
The share surged 3.1% to a two-month high in Seoul, and the company has achieved more than 40% year to date. It has already grown significantly in rank, especially in HBM, which is utilized in Nvidia's (NVDA, Financial) AI booster chips, in comparison with arch-rivals Samsung and Micron.
Following the company's decision to transition to higher-margin products, SK Hynix said it would begin shipping its 12-layer HBM3E in the fourth quarter. It wanted to boost its share of HBM sales to 40% from 30% of its total memory revenue. This move has been necessitated because, like many other companies in this industry, the company is still struggling to recover from a slump in computer and smartphone memory markets.
Boosting its healthy earnings, major demand for enterprise solid state drives remained over 60% of Nand sales of SK Hynix during the quarter. Nevertheless, the company is still concerned by the legacy product market, which has a tendency for an increased supply from Chinese manufacturers, leading to pricing pressures.
Masahiro Wakasugi of Bloomberg Intelligence is positive about the company and continues to predict higher operating profit, sustained by increasing demand and higher ASPs on high-performance memory chips. The company is also ramping up efforts to diversify to higher-value technologies to sustain its competitive advantage in the continuously growing technology industry.
In general, the present active acquisition of AI technology and high-performance chips, together with the continuous shift in production strategies, show that SK Hynix is more ambitious about maintaining its dominance worldwide.
This article first appeared on GuruFocus.