AI SK plans to more than double its HBM production capacity

According to reports, South Korean semiconductor manufacturer SK hynix Inc. plans to expand its investment in high bandwidth memory (HBM) production facilities to meet the increasing demand for high-performance AI products. The company plans to more than double its investment in facilities related to through-silicon via (TSV) technology by 2023, aiming to double its production capacity and begin production of its fifth-generation HBM3E high bandwidth memory product in the first half of 2024.

SK hynix's earnings report shows that the company achieved KRW 11.31 trillion (approximately USD 8.46 billion) in revenue and KRW 346 billion (approximately USD 259 million) in operating profit in the fourth quarter, marking a return to profitability after five consecutive quarters of losses.

The turnaround for SK hynix can be attributed to strong sales of HBM3 and DDR5. Compared to the previous year, the company's sales of DDR5 and HBM3 in 2023 increased by more than four times and five times, respectively. To continue this upward trend, SK hynix plans to start mass production of the AI chip HBM3E and accelerate the development of the sixth-generation HBM4.

"We expect a huge demand for HBM3E products in 2024 and plan to start mass production in the early part of the year. We intend to double the TSV capacity based on this demand," the company stated in a conference call. Regarding additional investments, the company expressed a more cautious stance, stating, "We will make a decision after careful consideration of long-term demand, market conditions, and supply chain status."

SK hynix plans to produce MCRDIMM and LPCAMM2, with the former being a high-capacity server module that integrates multiple DRAMs onto one substrate, and the latter being a high-performance mobile module based on low-power (LP) DDR5X, both aimed at meeting the demand for AI servers and AI devices.

While focusing on producing high-value-added products, SK hynix plans to minimize the growth of capital expenditures and emphasize stable business operations. "Compared to the previous year, we have reduced our investment by more than half to cope with weak demand. Our strategy for 2024 is to maintain a cautious attitude, focus on ensuring growth and profitability, and avoid entering a cycle of oversupply caused by increased investment," said CFO Kim Yoo-hyun.

SK hynix explained that since the third quarter of 2023, the company has maintained a cautious production strategy, including production cuts, resulting in sales exceeding production and subsequently improving inventory levels. "We will continue to maintain a cautious production strategy until inventory normalization is achieved in 2024, while expecting stable DRAM production in the first half of the year and stable NAND flash production in the second half," the company stated. Analysts predict that the operating profit of this chip manufacturer in 2024 will reach KRW 100 trillion (approximately USD 8.85 billion). Another analyst predicts that the company's operating profit in 2024 will reach KRW 106 trillion (approximately USD 9.42 billion), mainly due to the expected increase in demand for AI chips.

Since the beginning of 2023, SK Hynix's stock price has risen by nearly 50% due to its AI capabilities.