SK hynix's HBM3E and HBM AI memory chips supplied to Nvidia are on display at TSMC 2024 Technology Symposium at Santa Clara, Calif., Wednesday (local time). SK hynix joined the event to promote its cooperation with the Taiwan company to develop next-generation HBM memory chips. Courtesy of SK hynix

SK hynix's first-quarter operating profit surged more than 700 percent from the previous three month period thanks largely to strong sales of high bandwidth memory (HBM) chips and a rise in memory semiconductor prices, the chipmaker said, Thursday.

Operating profit jumped 734 percent to 2.88 trillion won ($2.1 billion) during the January-March period. Sales rose 10 percent over the same period to 12.43 trillion won, marking an all-time high for the quarter.

The performance exceeded market expectations, which had anticipated an operating profit of approximately 1.85 trillion won. The company credited the results to the price hikes of HBM chips, also referred to as AI memory chips, and NAND flash memory chips, affirming its emergence from a downturn cycle that resulted in an operating loss of 7.7 trillion won last year.

"With revenues reaching an all-time high for the first quarter and operating profit being the second-highest since the first quarter of 2018, SK hynix believes it has entered a phase of clear rebound following a prolonged downturn," the company said.

SK hynix offered a positive business outlook for the upcoming quarters, anticipating a steady rise in the overall memory market driven by increasing demand for AI memory chips and a resurgence in demand for conventional memory chips.

The company added that it anticipates improved performance in the second half of this year compared to the April-June period.

"The market will improve in the second half of the year compared to the first half," Kim Woo-hyun, chief financial officer of the company, told investors during a conference call. "On the supply side, suppliers are prioritizing securing HBM production capacity. We will expand production of premium products such as HBM this year.

"If demand improvement occurs in PCs, smartphones and servers in the second half of the year, memory inventory depletion will continue. If demand exceeds expectations, there may also be a supply shortage," the CFO added.

The company noted that the recovery in demand for NAND flash memory chips, mainly used in mobile devices and data center servers, had been slower compared to DRAM. But demand for high-priced NAND is now clearly increasing.

"NAND has shifted to profitability due to higher-than-expected prices, particularly driven by enterprise SSD (eSSD) products. Favorable price conditions and demand growth for our competitive eSSDs are expected in the second quarter," Kim said.

The executive added that demand for high-capacity and low-power NAND flash memory chips is increasing due to the expansion of the AI market.

Capitalizing on the recent spotlight on AI memory chips, SK hynix plans to invest about 20 trillion won to construct a new fabrication plant or fab called M15X in Cheongju, North Chungcheong Province, to meet the surging demand for next-generation DRAM products such as HBM.

"We believe the M15X plant to be built in Cheongju will be able to open by the end of 2025," the CFO said.

Additionally, the company announced plans to finalize the development of a 12-layer HBM3E product by the third quarter of this year. This advancement aims to enable the supply of a diverse range of customized products, spanning from next-generation HBM, achieved through technical collaboration with TSMC.

According to Kim Kyu-hyun, SK hynix's head of DRAM marketing, the focus of fifth-generation HBM, known as HBM3E, will center on supplying the eight-layer HBM3E variant throughout the current year.

"This year, the HBM3E products that customers are requesting are mainly eight-layer ones," Kim said. "We are preparing to complete development of a 12-layer HBM3E product in the third quarter of this year to meet the customer request timeline, and after customer certification, we will be ready to supply them reliably when demand starts to increase next year."