South Korean memory giant SK Hynix has released its financial results for the fourth quarter of 2023 and the full year 2023, ending on December 31, 2023. In the fourth quarter, the revenue reached KRW 11.306 trillion, operating profit amounted to KRW 346 billion, and net loss was KRW 1.38 trillion. The operating profit margin for Q4 2023 was 3%, with a net profit margin of negative 12%.

Source: SK Hynix

SK Hynix noted that, with the rebound in the memory market, the operating profit for the fourth quarter of 2023 reached KRW 346 billion, successfully marking a turnaround from losses. This signifies that SK Hynix, in just one year, has managed to break free from the continuous operating losses experienced since the fourth quarter of 2022.

SK Hynix emphasizes that the overall memory market conditions improved in the last quarter of 2023 with demand for AI server and mobile applications increasing and average selling price (ASP) rising. 

Simultaneously, the effective implementation of a profit-oriented business plan by SK Hynix has enabled the company to achieve the goal of turning losses into profits within just one year.

Source: SK Hynix

Furthermore, SK Hynix has reduced the cumulative scale of operating losses that persisted until Q3 2023. In total, the consolidated revenue for 2023 reached KRW 32.766 trillion, with an operating loss of KRW 7.73 trillion and a net loss of KRW 9.138 trillion. Overall, the operating loss rate for 2023 is 24%, and the net loss rate is 27%.

SK Hynix also notes that in the DRAM sector for 2023, the company actively addressed customer demands. The revenue for the company’s flagship products, DDR5 and HBM3, increased by more than four and five times, respectively, compared to 2022.

Additionally, considering the relatively slow recovery in the NAND Flash memory market, the business plan primarily focuses on investment and cost efficiency.

In response to the growing trend in demand for high-performance DRAM, SK Hynix will smoothly proceed with the mass production of HBM3e memory for AI and the development of HBM4.

TrendForce’s earlier research into the HBM market indicates that NVIDIA plans to diversify its HBM suppliers for more robust and efficient supply chain management. The progress of HBM3e, as outlined in the timeline below, shows that SK Hynix provided its 8hi (24GB) samples to NVIDIA  in mid-August.

Simultaneously, the company aims to supply high-performance and high-capacity products like DDR5 and LPDDR5T to the server and mobile markets.

Moreover, to address the continued growth in demand for AI servers and the widespread adoption of edge AI computing applications, SK Hynix will exert efforts in the development of high-capacity server module MCR DIMM and mobile module LPCAMM2 to respond to the ever-increasing demand for AI servers and on-device AI adoption.

For NAND, the company aims to continue to improve profitability and stabilize the business by expanding sales of premium products such as eSSD, expected to improve profitability and strengthen internal management.

Lastly, SK Hynix emphasizes its commitment to maintaining and enhancing profitability and efficiency by continuing to expand the production of high-value-added products in 2024, similar to its strategy in 2023. The company will focus on minimizing capital expenditures while prioritizing stable business operations. 

“We achieved a remarkable turnaround, marking the first operating profit in the fourth quarter following a protracted downturn, thanks to our technological leadership in the AI memory space,” said Kim Woohyun, Vice President and Chief Financial Officer (CFO) at SK Hynix.

Kim further stated, “We are now ready to grow into a total AI memory provider by leading changes and presenting customized solutions as we enter an era for a new leap forward.”

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(Photo credit: SK Hynix)

Pei-Ing Lee, the General Manager of Nanya Technology, a major DRAM manufacturer, mentioned on January 10th that this year has seen an upward trend in DRAM prices

According to Economic Daily News citnig from Nanya Technology’s earnings call for 23Q4,  this trend is attributed to the resurgence of the smartphone market, increased demand fueled by AI, and the three major memory manufacturers pivoting towards DDR5 production. This shift is advantageous for depleting DDR4 inventory and could potentially result in a supply shortage.

Having endured over a year of downturn in the memory market, Lee expressed an optimistic outlook by stating that “there is a possibility of future supply shortages,” revealing an overall positive trajectory for the DRAM market.

Lee acknowledged that the DRAM market faced challenges last year, resulting in stagnant bit sales for Nanya Technology. However, he anticipates a better scenario this year, noting the upward trend in DDR4 pricing. The timing for DDR3 price increases is expected to follow but at a slower pace. Lee further stated that DDR3 constituted about 40% of Nanya Technology’s revenue  in the past, but it is expected to decrease, with DDR4’s share rising.

Due to major international players focusing on High-Bandwidth Memory (HBM) and DDR5, he anticipates a potential supply shortage for DDR4 this year.

Lee pointed out that the growth in AI demand is positively impacting the DRAM market. The shift from high-end HBM and DDR4 to DDR5 is influencing demand, showing improvement quarter by quarter.

Regarding pricing trends, he confirmed a rebound in prices in the fourth quarter of 2023 and expressed optimism for a gradual upward trend in 2024. However, Lee cautioned that external variables such as geopolitical tensions, the war in Europe, and the U.S.-China trade dispute could still impact the market’s recovery momentum.

In terms of demand, Lee highlighted four key points. Firstly, server demand is driven by AI servers, with a focus on observing IT spending by U.S. cloud companies. Secondly, the introduction of new smartphones, leading to an increase in average DRAM capacity, especially in AI smartphones boosting the high-end smartphone market. Presently, improving smartphone sales in China are observed, and the recovery momentum of the Chinese economy is crucial.

In the PC application sector, Lee mentioned that inventory is gradually returning to normal levels, and AI PCs will simultaneously boost the high-end PC market. As for consumer electronic terminal products, demand for IP cameras, networking, industrial control, and automotive applications is relatively healthy, with consumer electronic products expected to show stable growth in 2024.

In terms of technological advancements, Nanya Technology aims to begin small-scale production of DDR5 products at the end of the third quarter of this year. Initially applied in servers and partly in PCs, the first product is expected to achieve a bandwidth of 5600MHz, while the second product is currently in the design phase, with an estimated bandwidth of 6400MHz.

Lee explained that their second DDR5 product will utilize third-generation processes, aiming to further improve cost structures, increase speed, achieve a target of 6400 MHz, and possess the capability for high density and 3D IC technology.

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(Photo credit: Nanya Technology)

SK Hynix CEO Kwak Noh-Jung expressed optimism at the Consumer Electronics Show (CES) in the United States, stating that artificial intelligence (AI) chips would propel SK Hynix’s market value to double within three years, reaching KRW 200 trillion (approximately USD 152 billion).

Kwak also revealed plans to adjust the DRAM production reduction policy in the first quarter, while anticipating changes in NAND Flash production strategy in the latter half of the year.

At the CES exhibition in Las Vegas, Kwak emphasized that generative AI is gradually becoming widespread, and memories are increasingly crucial. With the advancement of AI systems, customer demands for memory will become more diverse. Kwak highlighted the development of a platform to offer customized options for various customers.

“If we prepare the products we are currently producing well, pay attention to maximising investment efficiency and maintaining financial soundness, I think we can attempt to double the current market capitalisation of 100 trillion won to 200 trillion won within three years,” Kwak said.

Kwak further stated in the CES: “There are only three HBM providers in the market. What I can say for sure is that SK Hynix is a clear leader in the HBM space.”

For the current HBM market, as reported by TrendForce earlier, SK hynix holds the lead in HBM3 production, serving as the principal supplier for NVIDIA’s server GPUs.

Samsung, on the other hand, is focusing on satisfying orders from other CSPs. The gap in market share between Samsung and SK hynix is expected to narrow significantly in 2023 due to an increasing number of orders for Samsung from CSPs. Both firms are predicted to command similar shares in the HBM market sometime between 2023 to 2024—collectively occupying around 95%.

Meanwhile, when asked if SK Hynix would ease its current chip production reduction policy, Kwak responded that the company’s policies are flexible and will be adjusted based on different product categories.

He mentioned that SK Hynix might change its DRAM production reduction policy in the first quarter, while adjustments for NAND Flash are anticipated to take place in the latter half of the year.

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(Photo credit: SK Hynix)

The ongoing reduction in production by major manufacturers throughout this year has gradually restored balance to the market supply and demand. This is beneficial for chip manufacturers to regain control over prices. Signs of a bottoming out and rebound have emerged in the memory market in the third quarter of this year.

TrendForce data reveals that the overall price of DRAM has been declining since 4Q21 and only began to rebound in 4Q23, marking a total decline over 8 quarters. As for NAND Flash, the overall price started declining from 3Q22 and began to rebound from 3Q23, totaling a decline over 4 quarters.

However, despite the recovery in demand, achieving effective destocking and returning to a state of supply-demand equilibrium next year still heavily relies on suppliers exercising restraint in production capacity. If suppliers can control production capacity appropriately, there is a chance for the average memory prices to continue their rebound.

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(Photo credit: Samsung)

After more than two years of stagnation in the memory market, which was exacerbated by production cuts from major players like Samsung and Micron earlier this year, the issue of overstock has finally seen improvement.

As per Nikkei’s report, this has driven an increase in prices for DRAM, marking the first such occurrence in nearly two and a half years. Observers are optimistic that the memory market will hit bottom this year, with a recovery and growth expected in 2024.

According to TrendForce’s data, the contract price for the DDR4 8GB, considered a benchmark product for DRAM, reached USD 1.50 in October, a 15.4% increase from September and the first increase since July 2021. The contract price for the same product continued to rise in November by 10%, reaching USD 1.65.

In addition to the DDR4 8GB product, other specifications of DRAM contract prices generally experienced monthly increases of around 10% in October this year. Generally, memory contract prices are determined collaboratively by chip suppliers and corporate customers, and an increase in contract prices signifies an advantage for suppliers.

There are signs of a bottoming out and rebound in the DRAM market in the third quarter of this year. TrendForce indicated that the global DRAM market’s revenue increased by 18% compared to the previous quarter, reaching USD 13.48 billion.

This growth, reportedly, is primarily attributed to production cuts by major suppliers throughout the year, gradually restoring balance to the market supply and demand.

The report also reflects on the pandemic period, noting that the global surge in remote work initially led to a sharp increase in demand for memory. However, as the pandemic gradually subsided in 2021, market demand cooled.

Additionally, persistent challenges such as high inflation and interest rates impacting consumer spending weakened demand for PCs and various consumer electronic devices. This, in turn, led to global oversupply in memory, causing prices to decline consistently.

Major DRAM manufacturers, including Samsung, SK Hynix, and Micron, have been reducing production since the beginning of this year, and they have recently managed to reverse the downturn.

Samsung reported a 16% revenue growth in the third quarter, while SK Hynix achieved an impressive growth rate of 34.4%. Despite a decline in average selling prices, Micron’s third-quarter chip shipment growth contributed to an overall revenue growth of 4.2%.

Moreover, the global NAND Flash market saw a 2.9% sequential increase in revenue in the third quarter, and a growth rate of 20% is anticipated for the fourth quarter, according to TrendForce’s latest research.

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(Photo credit: Samsung)