sytems<\/p>\n
Don’t worry about an AI bust, monster profits and huge margins are here to stay<\/p>\n
South Korean memory-maker SK Hynix has revealed that it\u2019s struck \u201caround ten\u201d long-term supply deals with key customers, many of them AI players, and hopes the deals smooth out volatile memory prices.<\/p>\n
The company revealed the deals today, along with Q2 results that saw quarterly revenue reach \u20a979.3 trillion ($54.5 billion), a 257 percent year-over-year increase. Operating profit grew by an even larger number: 557 percent year-over-year to \u20a960.5 trillion ($41.6 billion). The memory-maker even achieved the unusual feat of delivering more net income than revenue, thanks to asset sales.<\/p>\n
Underlying all that growth was an average 30 percent increase in the average price customers paid for DRAM, a 50 percent rise in the prices paid for NAND memory, along with increased shipments.<\/p>\n
But the company predicted slow growth in Q3, with NAND shipments rising by a low single-digit percentage and about ten percent more DRAM to leave SK Hynix\u2019s factories. Some of that memory will be HBM4, which execs said will ship in increased volume and mean average selling prices rise higher still, as will earnings.<\/p>\n
Execs pointed to the company\u2019s colossal expenditure on additional manufacturing capacity but said they see no risk of creating oversupply because the AI industry has a voracious appetite for memory and will do for the foreseeable future.<\/p>\n
Indeed, company president Song Hyeon-jong said SK Hynix\u2019s relationship with customers \u201cis evolving beyond transactional relations into more strategic long-term partnerships\u201d and said that behavior \u201cserves as the evidence of the sustained demand coming from the AI ecosystem.\u201d<\/p>\n
SK Hynix\u2019s big customers are therefore typically doing deals that last up to five years and structuring those arrangements to keep prices steady.<\/p>\n
\u201cThe objective is to reduce uncertainty arising from short-term market volatility while enhancing long-term business stability for both our customers and SK Hynix,\u201d Song said.<\/p>\n
\u201cAt the same time, it is equally important to secure effective purchase commitment, given the impact that demand volatility can have on the memory cycle,\u201d he added. \u201cIn addition to long-term volume commitments, the agreements include mechanisms such as deposits that can strengthen contract implementation and demand visibility.\u201d<\/p>\n
All of which sounds rather like SK Hynix\u2019s big customers are trying to keep memory prices as low as possible, by helping the Korean company to manage its cashflow so it can keep cranking out more chips.<\/p>\n
Head of investor relations Park Seong-hwan argued that demand for memory and storage will remain strong for years to come, even if major AI companies find themselves with more datacenter capacity than they need.<\/p>\n
Park said hyperscalers leasing their datacenters is a sign of increased utilization rates for existing AI infrastructure. He also brushed aside adoption of more efficient models as a trend that could be bad for memory sales, suggesting better models spur demand for AI services and therefore also for more infrastructure.<\/p>\n
\u201cThis view is also supported by the medium-to long-term demand outlook we have discussed with our key customers,\u201d Park said. The company also argued that agentic AI will spur demand for more memory, including in servers.<\/p>\n
\u201cWe are witnessing a structural shift in demand where both AI memory and conventional memory are growing together,\u201d the company wrote in its earnings release.<\/p>\n
Investors appear not to have been impressed by those arguments, or SK Hynix\u2019s profits, as the company\u2019s share price has dropped around five percent at the time of writing. \u00ae<\/p>\n","protected":false},"excerpt":{"rendered":"sytems Don’t worry about an AI bust, monster profits and huge margins are here to stay South Korean…\n","protected":false},"author":2,"featured_media":716985,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[554,733,4308,86,56,54,55],"class_list":["post-716984","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-technology","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/716984","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=716984"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/716984\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/716985"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=716984"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=716984"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=716984"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}