TL;DR:
- SK hynix reports an increase in revenue for Q2 2023, driven by higher sales of DRAM and NAND products.
- Demand for AI server memory has surged, leading to a 44 percent sequential increase in revenue for the second quarter.
- DRAM prices are improving as memory companies reduce production, and SK hynix predicts long-term AI server growth in the mid-30 percent CAGR range.
- The company plans to expand sales of high-end DRAM products and increase HBM3 and DDR5 output to meet AI server demand.
- However, the NAND market remains challenging, and SK hynix will reduce NAND output by 5 to 10 percent to address high inventory levels.
Main AI News:
Korean semiconductor giant, SK hynix, has confidently declared that the DRAM market has reached its bottom and is poised for an upward trajectory, attributing the positive outlook to the burgeoning demand for AI server memory, especially within the generative artificial intelligence (AI) sector. As the AI revolution continues to gain momentum, the demand for AI server memory has surged dramatically, leading to a substantial sequential increase in revenues for SK hynix during the second quarter of 2023.
In the second quarter, SK hynix reported combined revenues of 7.306 trillion won ($5.7 billion) from its DRAM and NAND operations, reflecting a 47 percent drop compared to the same period last year. Despite this challenging environment, the company managed to register a profit of 2.9 trillion won ($2.2 billion), with both DRAM and NAND product sales showing improvement. Notably, the higher DRAM average selling price (ASP) played a pivotal role in driving revenue growth during the quarter.
Looking ahead, SK hynix is optimistic about the sustained demand for AI memory solutions, particularly as the AI server market is expected to experience a long-term growth rate of approximately 30 percent. Furthermore, the company anticipates that DRAM prices will continue to improve due to reduced production by memory companies across the board.
Kim Woohyun, Vice President, and CFO at SK hynix, confidently stated, “Having passed the trough in the first quarter, the memory semiconductor market is seen to have entered the recovery phase. SK hynix will strive to prop up earnings through its technological competitiveness in high-end products.” This commitment to technological prowess includes a focus on high-end DRAM products like HBM3, DDR5, LPDDR5 memory, and 176-layer SSDs, which are projected to bolster the company’s overall revenue.
With an eye on the growing demand for AI servers, SK hynix plans to ramp up production of HBM3 and DDR5 memory, anticipating a substantial surge in demand. However, the NAND market remains challenging, with excess inventory levels creating an imbalance between production and demand. To address this, the company will be making the prudent move of reducing NAND output by 5 to 10 percent.
In terms of technology enhancements, SK hynix aims to elevate the quality and yields of its cutting-edge gen 5 10nm DRAM process technology, ensuring higher production levels. Similar efforts will be made with its 238-layer NAND, but mass production expansion will be executed judiciously, synchronized with a promising NAND industry upturn.
Amidst all these developments, there were reports of SK hynix rejecting rumors about selling its Dalian 3D NAND fab in China. The Dalian facility, acquired from Intel along with Solidigm, plays a vital role in producing Solidigm SSDs. Additionally, the company also made a strategic move to reduce costs by laying off 98 employees from the Sacramento County branch of its NAND Product Solutions Corp.
Conclusion:
SK hynix’s positive revenue growth in the DRAM and AI server memory sectors indicates a recovering memory market, driven by increasing demand for AI-driven solutions. The company’s focus on high-end DRAM products and plans to boost HBM3 and DDR5 output demonstrate its commitment to capitalizing on the growing AI market. However, challenges persist in the NAND market due to excess inventory, prompting SK hynix to take necessary measures to achieve a better balance between production and demand. As AI adoption continues to rise, SK hynix’s strategic approach positions them well to maintain a strong presence in the semiconductor industry.
