SK Hynix has this week reported a return to operating profitability in the fourth quarter of 2023. This marks a significant turnaround, with an operating profit of 346 billion won ($258.83 million). The fourth quarter improvement was attributed to a recovery in the DRAM chip market, driven by increased demand for expensive AI server (HBM3) and mobile applications (LPDDR5X).
"In DRAM, we responded swiftly to the surging demand from AI customers with premium products like high-density DDR5 and high performance HBM3, leveraging our technological competitiveness," said Kim Woo-Hyun, chief financial officer of SK Hynix, at the company's conference call with analysts and investors (via SeekingAlpha). "DDR5 sales increased by more than 4x and HBM3 sales increased more than 5x compared to the previous year. We solidified our position as a leading company in the HBM market, a core product of AI memory."
SK Hynix earned 11.31 trillion won ($8.459 billion) revenue in Q4 2023, a massive 47% year-over-year increase and a significant 25% quarter-over-quarter increase. The company's operating profit totaled 346 billion won ($258.83 million), which is a massive improvement compared to 1.912 trillion won ($1.43 billion) loss in the year-ago quarter. Still the company's net loss was 1.38 trillion won ($1.032 billion). While the results are as good as they were a couple of years back, they follow four consecutive quarters of massive losses.
There are several reasons why SK Hynix has managed to narrow its net loss and return to operating profitability. First up, the company increased shipments of expensive memory products — such as HBM3, HBM3E, LPDDR5X, LPDDR5T, and high-capacity DDR5 products — to makers of AI servers as well as smartphones. Sales of DDR5 increased by more than four times, and HBM3 by more than five times compared to the previous year, the company said. As a result, average selling prices (ASPs) of the company's DRAMs increased substantially, according to the memory maker.
Not everything is rosy in the 3D NAND space, due to SK Hynix's customers storing lots of inventory and therefore demand for non-volatile memory was slow in Q4 2023. As a result, the company focused primarily on costs and investments during the quarter.
"In light of the challenging demand landscape, particularly for NAND, unlike DRAM that experienced benefits from AI, we maintained conservative production stance, placing emphasis on improving investment and cost efficiency," said Kim Woo-Hyun.
Nonetheless, 3D NAND prices demonstrated positive dynamics in the fourth quarter, so the company expects this business to recover in 2024 as well. As a result, the company will increase its investments in 3D NAND memory production in 2024. Meanwhile, going forward SK Hynix will focus on higher-margin products rather than on raw NAND devices.
