Nvidia supplier SK Hynix sees no oversupply of AI chips as profits hit record

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Nvidia supplier SK Hynix sees no oversupply of AI chips as profits hit record

By Heekyong Yang, Hyunjoo Jin and Joyce Lee

SEOUL (Reuters) – South Korea’s SK Hynix posted a record quarterly profit on Thursday as the Nvidia supplier posted strong sales of its advanced chips and said demand for high-bandwidth memory chips (HBM ) would continue to exceed supply next year.

The company played down market concerns about an oversupply of chips used in generative AI chipsets, saying production of higher-margin HBM chips was limited due to technological challenges, while demand was proving more strong than expected.

“We think it’s premature to talk about a slowdown in demand for AI chips and HBMs at this point,” Kim Kyu Hyun, head of DRAM marketing at SK Hynix, said in a conference call. citing the ever-increasing needs for computing power.

The world’s second-largest memory chip maker posted an operating profit of 7 trillion won ($5.07 billion) for the July-September quarter, compared with a loss a year earlier. This compares to LSEG SmartEstimate’s average forecast of 6.8 trillion won, which leans in favor of the most accurate analysts.

SK Hynix has outperformed rivals Samsung Electronics and Micron Technology in recent quarters as it has benefited most from AI’s appetite for high-end memory chips following its early entry and significant investments in the development of HBM chips.

Its biggest rival, Samsung, warned earlier this month that its third-quarter profit would fall short of market expectations and apologized for the disappointing performance, citing delays in sales of its high-end HBM3E chips. to an unidentified major customer.

Nvidia CEO Jensen Huang said Wednesday that a design flaw in its latest Blackwell AI chips that affected production had been fixed with the help of Taiwanese manufacturing partner TSMC. These AI chipsets use HBMs made by SK Hynix, according to analysts.

SK Hynix said HBM sales showed strong growth, up more than 70% from the previous quarter. Total revenue for the quarter increased 94 percent year-on-year to 17.6 trillion won.

“SK Hynix has reaffirmed its competitive advantage in the HBM market. Its leading position as a supplier of HBM chips is expected to be maintained next year,” said Ko Yeongmin, an analyst at Daol Investment & Securities.

Shares of SK Hynix were trading 2.3% higher compared with a 0.1% decline in the benchmark KOSPI index at 0318 GMT.

Its shares have surged 38.5% since the start of the year, while those of Samsung have fallen 24.7%. Samsung shares fell 2% on Thursday.

SK Hynix estimates that HBM sales represent 40% of its total DRAM revenue in the fourth quarter, up from 30% in the third quarter, and added that it expects demand for memory chips for servers of AI continues to grow next year, as global technology companies race to do so. develop generative AI.

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