South Korea’s SK Hynix Inc., the world’s second-largest memory chip manufacturer, announced a return to profitability in the fourth quarter of 2023. The company posted an operating profit of 346 billion won ($259.8 million), significantly outperforming market expectations of an operating loss of 192 billion won. This is in stark contrast to the 1.9 trillion won loss reported in the same quarter a year earlier. The gains are attributed to a 47% increase in sales, driven by strong demand for AI-focused memory chips.
The company’s focus has shifted to high-performance memory semiconductors, particularly those used in AI chipsets. SK Hynix’s advanced DRAM chips, such as High Bandwidth Memory (HBM) chips, are seeing increasing demand, especially for graphics processing units (GPUs) used for processing large amounts of data in generative AI. A major achievement for SK Hynix in 2023 was the development of HBM3 chips, which the company did ahead of its competitors. Sales of these chips have increased more than fivefold compared to the previous year.
Looking ahead, SK Hynix aims to start mass production of its next HBM version, HBM3E, in the first half of 2024, while simultaneously working on the development of the next generation chip, HBM4. The company’s technological leadership in AI memory has been a crucial factor in the turnaround. Analysts predict that HBM chips will account for 15% of industry DRAM sales by 2024, up from 8% in 2023.
Despite the positive earnings report, SK Hynix shares fell 2.6% in afternoon trading, attributed to profit-taking by investors. The company’s shares were up 18% since its last quarterly earnings, driven by the positive outlook for AI memory chips. Nevertheless, the broader market is expected to see an improvement in chip prices as customers replenish inventories and manufacturers continue to scale back production of old chips.
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