DRAM, NAND, & AI: SK hynix's Q2 2023 Analysis

In the latest quarter, SK Hynix Inc. released its financial figures, revealing trends in the technology business.

Key Figures:

• Revenue: KRW 7.306 trillion.
• Operating loss: KRW 2.882 trillion.
• Net loss: KRW 2.988 trillion.
• Operating margin: Sitting at -39%.
• Net margin: Widened further to -41%.
• Sequential growth: Revenues grew 44% YoY
• Operating Loss Adjustment: Loss improved by 15% QoQ
  
  

Driving factors:

• AI server memory demand: Driven primarily by the rise of generative AI applications such as ChatGPT.
  
• Premium product traction: HBM3 and DDR5 sales were crucial in revenue performance.
  
• DRAM and NAND momentum: Both segments experienced upticks. In particular, DRAM blended ASP increased despite declining DDR4 prices, reflecting higher sales of premium AI server products.
  
• Cost reduction: A relentless focus on cost reduction reduced operating loss.

Future Roadmap:

• Plans to expand elite DRAM product offerings: HBM3, DDR5 and 176-layer SSDs are on the horizon.
  
• The roadmap also emphasizes refining the quality and production of 1b nanometer DRAM and 238-layer NAND.
  
• Interestingly, the company is signaling a pullback in NAND production due to its inflated inventory compared to DRAM.

From the boardroom: Kim Woohyun, the company's VP and CFO, articulated the company's strategic intentions. He explained that capital expenditures would be reduced by 50% from 2022 levels.

However, the capital would be channeled into ramping up high-end DDR5 and HBM3 production to prepare for future market demands. He emphasized the rebounding nature of the memory semiconductor space, underpinned by technical superiority in premium products.

Market Pulse:

Memory Demand: AI servers demonstrate a voracious appetite for memory, outpacing traditional servers. This paradigm shift represents promising profitability corridors.

Hardware Forecast: Forecasts for PCs, smartphones, and traditional servers have been revised downward.

High-Performance Memory: The market shows robust demand for high-end memory and AI servers.

Growth Forecast: The AI server segment is expected to grow at a CAGR of 30% for the foreseeable future.

On the technology front: Preparations are underway to introduce next-generation 1B nanometer and 138-layer technologies. In addition, a partnership with Intel will catalyze a 1B nanometer-based server DDR5.

Sustainability efforts: SK Hynix's 2023 Sustainability Report highlighted its green initiatives. From a modest 4% renewable electricity usage in 2021, the company made a quantum leap to 29.6% in 2022.