SK Hynix Conference Call: DRAM supply tightness may continue into the second half of the year, HBM4 has fully ramped up production but still struggles to meet customer demand

SK Hynix released a clear signal during its latest earnings call: the supply tightness in the memory market will continue, and the company is fully committed to expanding production of high-end products but still cannot fully meet customer demand. This supply-demand pattern is expected to persist in the second half of this year.

SK Hynix stated that the DRAM inventory in the fourth quarter has significantly decreased year-on-year, with products being shipped to customers immediately after production, leaving almost no room for inventory accumulation. The company expects that as time progresses into the second half of this year, DRAM inventory will further shrink, and the supply tightness for customers may continue for some time.

In terms of high bandwidth memory (HBM) business, SK Hynix revealed that despite currently maximizing production of HBM4, it is still difficult to fully meet customer demand. The company's goal is to gain an overwhelming market share in the HBM4 market, continuing its dominance in HBM3 and HBM3E products.

Additionally, the company holds a cautious attitude towards large-scale manufacturing expansion in the United States but has announced an investment of $10 billion to establish an AI solutions company in the U.S., utilizing advanced chip technologies, including HBM, to provide optimized AI systems for data center customers.

Continued Tight Supply of Memory

SK Hynix elaborated on the current supply situation during the conference call. The company's DRAM inventory saw a significant year-on-year decline in the fourth quarter, with produced products being shipped immediately to customers, leaving little room for inventory accumulation.

The company further pointed out that DRAM inventory is expected to further contract in the second half of this year, which means that the supply tightness for customers may continue for quite some time.

In terms of NAND flash memory, SK Hynix stated that inventory, primarily consisting of solid-state drives (SSD), has been declining since the second half of last year and is currently at a level comparable to DRAM.

HBM4 Strategy: Targeting Overwhelming Market Share

SK Hynix's HBM4 supply strategy became the focus of the conference call. The company stated its goal is to gain an overwhelming market share in the HBM4 market, continuing its dominance achieved in HBM3 and HBM3E products.

The company emphasized that its competitiveness in the HBM market is not limited to technological leadership; since the HBM2E era, it has helped shape the market through close collaboration with customers and infrastructure partners. SK Hynix stated that its accumulated mass production experience and the trust earned in product quality represent advantages that are difficult to replicate in the short term.

To achieve the goal of obtaining an overwhelming market share, SK Hynix is focusing on improving yield rates to levels comparable to the previous 12-layer HBM3E, striving to occupy a leading position in the HBM4 market.

Full Capacity Still Cannot Meet Demand

Despite fully expanding production, SK Hynix admitted that supply remains tight. The company stated that it is currently maximizing production but still finds it difficult to fully meet customer demand, and expects some competitors to enter the market. However, SK Hynix emphasized that its market leadership and position as a leading supplier will continue.

Regarding HBM4 technology, SK Hynix stated that the fifth-generation (1b) process at the 10nm level used in existing products has met customer performance requirements. The company added that its goal is to capture demand by leveraging its proprietary packaging technology SK Hynix has shown a cautious attitude towards overseas expansion. Regarding the anticipated U.S. semiconductor tariffs, the company stated that it is currently monitoring discussions between the South Korean and U.S. governments. The company mentioned that investments in overseas semiconductor fabs involve numerous internal and external variables that must be carefully assessed, and it will share future directions at a later stage.

It is noteworthy that despite its cautious stance on large-scale manufacturing expansion in the U.S., SK Hynix has developed a selective investment plan. The company announced that it will establish an AI solutions company in the U.S., tentatively named AI Company (AI Co.), utilizing advanced chip technologies, including HBM, to provide optimized AI systems for data center customers. SK Hynix stated that it will invest $10 billion in this enterprise, deploying it through capital calls