Global Memory Powerhouse SK hynix Projected to Eclipse Microsoft, Alphabet in Annual Profit
SK hynix, a leading Korean memory chip manufacturer, is forecast to achieve an impressive operating profit exceeding 40 trillion won ($27 billion) for the first quarter, driven by surging memory prices and robust demand for high-bandwidth memory (HBM).
According to industry reports released on Sunday, the semiconductor giant is scheduled to announce its January-March earnings on April 23. Ahead of this highly anticipated release, local brokerage firms have presented strong estimates, with projections clustered around the 40 trillion won mark. Heungkuk Securities anticipates 40.1 trillion won, Kiwoom Securities projects 40.3 trillion won, DS Investment & Securities estimates 39.05 trillion won, and KB Securities forecasts 40.08 trillion won.
This exceptionally positive outlook for the memory chip sector is primarily attributed to a powerful combination of escalating commodity DRAM prices and significantly increased HBM shipments. Furthermore, NAND flash prices have seen substantial increases, buoyed by the expanding demand for enterprise SSDs as North American cloud service providers aggressively scale up their AI server investments.
Kim Dong-won, head of research at KB Securities, commented that the company’s operating profit growth trajectory is expected to accelerate dramatically from the first quarter.
“The expansion in operating profit is poised to enter a much faster phase starting in the first quarter,” he stated. “The structural uptrend in memory chip prices is anticipated to persist over the medium to long term, signaling a sustained boom for the semiconductor industry.”
Beyond operating profit, SK hynix is also expected to achieve new record-breaking operating margins. Market estimates indicate that the company could report an operating margin in the high-60 percent range, with some optimistic projections even reaching 70 percent or higher.
Such an achievement implies that for every 10,000 won in sales, the company could generate approximately 7,000 won in operating profit – a level of efficiency rarely observed in the capital-intensive manufacturing sector.
Should these projections materialize, SK hynix would not only set new internal records but also surpass Taiwan Semiconductor Manufacturing Company (TSMC) in operating margin for a second consecutive quarter. TSMC is globally recognized as the gold standard for profitability within the competitive semiconductor foundry industry.
Notably, SK hynix posted a robust operating margin of 58 percent in the fourth quarter of last year, outperforming TSMC’s 54 percent by a significant 4 percentage points. Considering TSMC’s first-quarter guidance of 54 to 56 percent, the profitability gap between the two leading semiconductor firms could potentially widen to nearly 20 percentage points.
This remarkable surge in operating margins is largely attributed to a tightening supply of memory chips relative to burgeoning demand, which has empowered suppliers like SK hynix with stronger pricing power across the market.
While HBM has been widely highlighted as a primary driver of SK hynix’s earnings, analysts now suggest that improved profitability and higher shipment volumes of commodity DRAM played an equally central role in driving this expected earnings surprise.
According to the latest data from market intelligence firm TrendForce, contract prices for commodity DRAM are estimated to have increased by an impressive 90 to 95 percent quarter-on-quarter in the first quarter alone.
“The margins for commodity DRAM are now believed to exceed even those of HBM, despite HBM’s premium market positioning and higher price point,” disclosed an industry source, who preferred to remain anonymous given the sensitivity of the information.
The category of commodity DRAM encompasses a broad spectrum of products, ranging from advanced standards such as DDR5, LPDDR5X, and GDDR7 to legacy DDR4, essentially referring to all types of dynamic random-access memory excluding the specialized HBM.
Industry estimates further suggest that HBM currently accounts for approximately 30 percent of SK hynix’s total DRAM shipments, with the remaining majority consisting of these conventional DRAM products.
Market expectations are also soaring for SK hynix’s full-year performance. Some prominent analysts are now forecasting that the memory chip powerhouse could achieve an unprecedented annual operating profit of around 250 trillion won for the entire year.
Kim elaborated that the full-year operating profit for SK hynix is projected to reach an astounding 251 trillion won, a monumental leap from approximately 47 trillion won recorded last year. “This level of profitability would position SK hynix to surpass the operating profits of global tech giants Microsoft and Alphabet, securing its place as the fourth most profitable company globally,” he concluded, underscoring the company’s ascendant position in the technology landscape.
yeeun
