Seoul (AFP) – Chip giant SK hynix said Thursday that net profit soared almost 400 percent to a record high in the first quarter thanks to the artificial intelligence boom, which helped it shrug off concerns that the Middle East war could hit the semiconductor industry. Huge investments from governments and major technology companies are driving frenzied demand for the hardware that powers generative AI tools. The South Korean company reported that net profit surged to 40.3 trillion won ($27.2 billion) in January-March, smashing the 29.4 trillion won estimated in a Bloomberg survey of analysts. Revenue surpassed 50 trillion won for the first time in a single quarter, while operating profit nearly doubled from the previous quarter.
“Despite the fact that (the) first quarter is typically a seasonal downturn, strong demand persisted due to expanded investments in AI infrastructure,” SK hynix said. “As AI evolves from large model training to the stage of agentic AI, which repeatedly performs real-time inference across various service environments, the foundation for memory demand is expanding.” The AI boom has pushed up prices and shipments of conventional memory chips, while demand for high-bandwidth memory (HBM) chips, used in AI servers, has soared. That has helped SK hynix shares to skyrocket about 600 percent over the past year. Its stock price rose around one percent in morning trade, as Seoul’s benchmark Kospi index opened at a record high.
– ‘Strong momentum’ –
Soaring demand for semiconductors has driven stronger-than-expected growth in South Korea, which on Wednesday posted its fastest quarterly expansion in more than five years. The country’s dependence on Middle Eastern fuel imports remains a cause for concern, though SK hynix said the Iran war would only have a “very limited” impact on its supplies of raw materials. “We have completed the diversification of suppliers…on which we previously had a high reliance on the Middle East,” chief financial officer Kim Woo-hyun said in an earnings call. Long-term contracts for oil and gas also mean that war-induced price fluctuations are “not significant”, Kim added.
Along with rival Samsung Electronics, SK hynix is supplying HBM to US industry titan Nvidia for its forthcoming cutting-edge “Vera Rubin” AI platform, which is expected to further boost the technology’s capabilities. While investors periodically get the jitters over how long the AI boom will last, analysts have said they do not expect the bubble to burst any time soon. “We expect earnings momentum to remain strong” this year for SK hynix, Kim Young-gun at Mirae Asset Securities said in a note this month. Reports suggest that memory chip suppliers like SK hynix are entering into long-term supply agreements of three years or more with big tech customers, he wrote. “In some cases, customers are even seeking options to extend contract durations beyond the initial term, underscoring their emphasis on supply stability.”
– Data demand –
The rush to build AI data centres has sent orders soaring for HBM chips, which help the systems process vast amounts of data. But as chipmakers prioritize the lucrative AI industry, they are producing fewer of the more workaday chips used in everyday consumer electronics like phones and laptops, pushing up device prices. “Excess demand is expected to persist through the end of the year” for so-called DRAM and NAND memory chips, said a Shinhan Securities report from early April. That allows “suppliers to maintain the upper hand in pricing power”, it said, predicting strong annual results for SK hynix in 2026.
SK hynix said on Thursday that it “plans to continue rolling out new products across both DRAM and NAND flash to address the diversifying memory demand”. But Park Joon-deok, its head of DRAM marketing, warned suppliers were struggling to meet demand and that rising prices for memory would likely be “more prolonged compared with the past.” The firm is increasing its chipmaking capacity and plans to spend 19 trillion won to build a new factory in South Korea’s Cheongju.
© 2024 AFP
