The SK hynix logo / Korea Times file

SK hynix said Thursday it swung to a profit in the first quarter of this year on the back of rising global demand for premium memory chip products used for artificial intelligence (AI) computing.

The world's second-largest memory chipmaker posted an operating profit of 2.88 trillion won ($2.09 billion) for the January-March period, compared with a loss of 3.4 trillion won a year ago, the company said in a regulatory filing.

It is the second-highest quarterly operating profit, following the records of the first quarter of 2018.

Its net profit came to 1.91 trillion won, turning from a loss of 2.58 trillion won a year earlier.

Sales shot up 144.3 percent to 12.42 trillion won, marking a record high for a first quarter.

The earnings beat market expectations. The average estimate of net profit by analysts stood at 1.53 trillion won, according to a survey by Yonhap Infomax, the financial data firm of Yonhap News Agency.

SK hynix attributed the larger-than-expected first-quarter performance to robust sales of its premium products for artificial intelligence, including high bandwidth memory (HBM) chips and a rebound in demand for NAND flash memory chips.

"An increase in the sales of AI server products backed by its leadership in AI memory technology, including HBM, and continued efforts to prioritize profitability led to a 734 percent on-quarter jump in the operating profit," the company said in a statement.

SK hynix expects the memory chip market will experience steady growth in the coming months as demand for AI memory continues to rise and the market for the conventional DRAM starts to recover from the second half.

Moreover, inventories both at suppliers and customers are forecast to decrease thanks to rising production of premium products such as HBM and relatively decreasing supply of conventional DRAMs.

SK hynix said it will increase supply volume of HBM3E products, the up-to-date HBM that was mass produced in March for the first time in the industry, and expand its customer base.

The company said it will begin providing HBM3E with 12 layers of DRAM chips from next year in a bid to absorb new demand for the higher-performance AI chips. Currently, the eight-layer HBM3E chips are leading the industry.

"We are preparing to complete the development of the 12-layer HBM3E in the third quarter and the customer verification in line with our customers' schedules," SK hynix said during an earnings call. "We are preparing to supply the product in a stable way when demand starts to increase in earnest next year."

HBM chips, known for their vertical interconnection of multiple DRAM chips, significantly enhance data processing speed, making them indispensable memory components for AI systems, such as OpenAI's ChatGPT.

SK hynix has recently solidified its leadership position in the booming AI memory semiconductor sector as its HBM3E products are key components of U.S. AI semiconductor powerhouse Nvidia''s AI processors.

It also plans to introduce 32 gigabits DDR5 products based on the 1bnm process, the fifth generation of the 10nm technology, within this year to strengthen its leadership in the high-capacity server DRAM market.

For the NAND business, SK hynix said it will seek product optimization to sustain the trend of earnings recovery by swiftly responding to market demands with an optimized product lineup.

Earlier this week, the chipmaker announced plans to invest 5.3 trillion won to convert a new fab named M15X in Cheongju, approximately 112 kilometers southeast of Seoul, into a DRAM production base in a bid to meet rising demand for AI semiconductors.

SK hynix said aside from the M15X fab, it will also carry out investments in advanced packaging facilities in Indiana in the United States and the Yongin Semiconductor Cluster in Korea as planned over the longer term.

As a result, SK hynix's investment for this year is expected to be larger than initially planned at the beginning of 2024.

"In addition to the plan to increase investment to meet rising customer demand, SK hynix will also boost supply of conventional DRAM in line with the market trend, which it expects to lead to a steady growth of the global memory market and an improved investment efficiency and financial soundness of the company," the company said. (Yonhap)