SK Hynix, the South Korean chipmaker, released its second-quarter earnings report for 2023 on Wednesday. The company reported a operating loss of 2.88 trillion Korean won ($2.24 billion) due to sluggish demand for memory chips. However, SK Hynix remains optimistic about the recovery of the memory chip market, especially with the growing demand for artificial intelligence (AI). The company stated that the smaller second-quarter operating loss is a result of robust AI demand.
Compared to the previous quarter’s loss of 3.4 trillion Korean won and the 4.2 trillion won profit from the same period last year, SK Hynix’s losses have narrowed. Refinitiv estimates predicted a 2.7 trillion won operating loss, indicating that the company’s actual loss was slightly higher. Memory chips play a crucial role in training large-language models like ChatGPT, enabling generative AI models to recall past conversations and user preferences for generating human-like responses.
SK Hynix highlighted the rapid growth of demand for AI server memory in its earnings report. Anthony Sassine, senior investment strategist at KraneShares, emphasized the underestimated potential of AI-related semiconductors and DRAM chips, anticipating a growth rate of 35% to 40%.
“I think ChatGPT and generative AI this year kind of opened my eyes to and made that realization happened sooner than expected. And now we’re trying to play catch up, and I think SK Hynix will benefit from that,” said Sassine.
Despite the positive outlook, SK Hynix’s shares were trading 1.23% lower on Wednesday morning in Asia. The company reported an increase in revenue from 5.08 trillion Korean won in the first quarter to 7.31 trillion Korean won in the second quarter. This growth was driven by the demand for AI and resulted in increased sales of premium products like HBM3 and DDR5.
Kim Woohyun, Vice President and CFO of SK Hynix, expressed confidence in the recovery of the memory semiconductor market, stating that it has passed the trough in the first quarter and is now entering the recovery phase.
SK Hynix is bullish on high-end DRAM products and is the world’s second-largest maker of dynamic random-access memory chips after Samsung Electronics. The company announced a 50% reduction in capital expenditure for 2023 to lower production following a 60% decline in third-quarter profit last year due to weak memory chip demand.
The memory chip market has been affected by excess inventories, as smartphone and PC makers stockpiled chips during the pandemic-induced boom. However, SK Hynix noted that sales of both DRAM and NAND flash memory products increased in the second quarter, with the higher average selling price of DRAM contributing to revenue growth. The company expects continued robust demand for AI memory and a potential increase in memory chip prices in the third or fourth quarter.
Overall, SK Hynix is optimistic about its future prospects, especially with the AI boom and the anticipated recovery of the memory chip market.
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