Revenue surpassed 50 trillion won for the first time in a single quarter, while operating profit nearly doubled compared to the previous three-month period (Jung Yeon-je) \u00b7 Jung Yeon-je\/AFP\/AFP <\/p>\n
Chip giant SK hynix said Thursday that net profit soared almost 400 percent to a record high in the first quarter thanks to the artificial intelligence boom, which helped it shrug off concerns that the Middle East war could hit the semiconductor industry.<\/p>\n
Huge investments from governments and major technology companies are driving frenzied demand for the hardware that powers generative AI tools.<\/p>\n
The South Korean said net profit surged to 40.3 trillion won ($27.2 billion) in January-March, smashing the 29.4 trillion won estimated in a Bloomberg survey of analysts.<\/p>\n
Revenue surpassed 50 trillion won for the first time in a single quarter, while operating profit nearly doubled from the previous quarter.<\/p>\n
“Despite the fact that (the) first quarter is typically a seasonal downturn, strong demand persisted due to expanded investments in AI infrastructure,” SK hynix said.<\/p>\n
“As AI evolves from large model training to the stage of agentic AI, which repeatedly performs real-time inference across various service environments, the foundation for memory demand is expanding.”<\/p>\n
The AI boom has pushed up prices and shipments of conventional memory chips, while demand for high-bandwidth memory (HBM) chips, used in AI servers, has soared.<\/p>\n
That has helped SK hynix shares to skyrocket about 600 percent over the past year.<\/p>\n
Its stock price rose around one percent in morning trade, as Seoul’s benchmark Kospi index opened at a record high.<\/p>\n
– ‘Strong momentum’ –<\/p>\n
Soaring demand for semiconductors has driven stronger-than-expected growth in South Korea, which on Wednesday posted its fastest quarterly expansion in more than five years.<\/p>\n
The country’s dependence on Middle Eastern fuel imports remains a cause for concern, though SK hynix said the Iran war would only have a “very limited” impact on its supplies of raw materials.<\/p>\n
“We have completed the diversification of suppliers… on which we previously had a high reliance on the Middle East,” chief financial officer Kim Woo-hyun said in an earnings call.<\/p>\n
Long-term contracts for oil and gas also mean that war-induced price fluctuations are “not significant”, Kim added.<\/p>\n
Along with rival Samsung Electronics, SK hynix is supplying HBM to US industry titan Nvidia for its forthcoming cutting-edge “Vera Rubin” AI platform, which is expected to further boost the technology’s capabilities.<\/p>\n
While investors periodically get the jitters over how long the AI boom will last, analysts have said they do not expect the bubble to burst any time soon.<\/p>\n
“We expect earnings momentum to remain strong” this year for SK hynix, Kim Young-gun at Mirae Asset Securities said in a note this month.<\/p>\n
Reports suggest that memory chip suppliers like SK hynix are entering into long-term supply agreements of three years or more with big tech customers, he wrote.<\/p>\n
“In some cases, customers are even seeking options to extend contract durations beyond the initial term, underscoring their emphasis on supply stability.”<\/p>\n
– Data demand –<\/p>\n
The rush to build AI data centres has sent orders soaring for HBM chips, which help the systems process vast amounts of data.<\/p>\n
But as chipmakers prioritise the lucrative AI industry, they are producing fewer of the more workaday chips used in everyday consumer electronics like phones and laptops, pushing up device prices.<\/p>\n
“Excess demand is expected to persist through the end of the year” for so-called DRAM and NAND memory chips, said a Shinhan Securities report from early April.<\/p>\n
That allows “suppliers to maintain the upper hand in pricing power”, it said, predicting strong annual results for SK hynix in 2026.<\/p>\n
SK hynix said on Thursday that it “plans to continue rolling out new products across both DRAM and NAND flash to address the diversifying memory demand”.<\/p>\n
But Park Joon-deok, its head of DRAM marketing, warned suppliers were struggling to meet demand and that rising prices for memory would likely be “more prolonged compared with the past”.<\/p>\n
The firm is increasing its chipmaking capacity and plans to spend 19 trillion won to build a new factory in South Korea’s Cheongju.<\/p>\n
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