In view of the rapid growth of the AI market demand, SK Hynix has been increasing investments in products with high gross margins, such as High Bandwidth Memory (HBM) and DDR5. SK Hynix recently said all of its HBM3/3E capacities in 2024 have been booked by customers.
According to Korean news outlets such as Yonhap and Bloter, SK Hynix has revealed that the 2024 capacity of HBM3 and HBM3E has already been snapped up, and there are still many inquiries related to customers' ordering needs. In addition, SK Hynix is also discussing with many customers about the (other) main suppliers of HBM.
SK Hynix estimated In 2023, the proportion of AI servers will be about 10% of the overall servers, and the future AI server market will grow by more than 40% annually, for example. HBM, in which SK Hynix has a dominant market position, is expected to grow by 60%~80% annually in the next 5 years.
However, SK Hynix will maintain a conservative production strategy for NAND products with high inventory levels. SK Hynix will work to improve the profitability of the NAND business and expects a quarterly reduction of approximately 10% in NAND shipments in Q4 2023 (including its subsidiary Solidigm).
Taking DRAM as an example, in the second half of 2023, SK Hynix will aggressively reduce the proportion of DDR4 production. By 2024, SK Hynix will expand the production of high-value-added products, such as DDR5 and HBM3, and will endeavor to push forward the advanced manufacturing process and expand investment in HBM's through-silicon vias (TSV) technology.
SK Hynix pointed out that the increase in the number of NAND stack layers has put pressure on investment expenses and slowed down the pace of cost savings. To overcome the constraints on cost savings and improve profitability, it will strengthen its lineup of high-end products with high average selling prices (ASP), maximize investment efficiency, and minimize business volatility through appropriate allocation of resources.
According to SK Hynix's official 3Q2023 financial report, revenue was approximately KRW9.66 trillion, a 17.5% annual decrease and a 24.1% quarterly increase, while operating loss was approximately KRW1.79 trillion. Although the company did not turn from a loss to a profit, the operating loss decreased by 37.8% quarter-over-quarter. It is worth noting that SK Hynix's DRAM shipments and average selling price (ASP) increased by 20% and 10% quarter-on-quarter respectively in Q3 2023, and the DRAM business has turned from a loss to a profit after two quarters, which is particularly meaningful.
