South Korea SK Hynixone among the world's largest memory chip makers, reported record quarterly profit on Thursday, driven by strong demand for its high-bandwidth memory (HBM), which is utilized in generative AI.

Here are SK Hynix's third-quarter results in comparison with LSEG SmartEstimate, which relies on analyst forecasts which might be consistently more accurate:

• Revenue: 17.57 trillion won (US$12.7 billion) versus 18.11 trillion won
• Operating profit: 7.03 trillion won (US$5.08 billion) versus 6.8 trillion won

Operating profit hit its highest level within the July-September quarter, recovering from a lack of 1.8 trillion won within the 12 months same period last 12 months.

Quarterly revenue rose about 94% year-on-year to 9.1 trillion won.

The South Korean chip giant is a key supplier to Nvidia and is benefiting from the boom in servers with artificial intelligence.

SK Hynix said in his Results publication On Thursday, the corporate said demand for AI storage, particularly from data center customers, remained strong within the third quarter, allowing the corporate to extend sales of premium products comparable to HBM.

HBM is a sort of dynamic random access memory, often known as DRAM, by which chips are stacked vertically to save lots of space and reduce power consumption. DRAM is often utilized in laptops, workstations and PCs. SK Hynix, Micron Technology and Samsung Electronics are the three largest manufacturers of HBM chips.

Sales of HBM products also increased by greater than 70% in comparison with the previous quarter and greater than thrice in comparison with the identical period last 12 months, with the corporate expecting further growth.

“While the storage requirements for AI servers like HBM and [high-density enterprise SSD] “Grown significantly this year, the company expects this trend to continue next year,” the corporate said in an announcement Press release. Enterprise SSD is a knowledge storage device for servers.

Generative AI continues to advance and major technology firms are investing in developing the technology that supports demand, the corporate said.

SK Hynix also predicted that memory demand within the PC and mobile consumer products markets, which has been slower to get well from a downturn, shall be on a gentle growth path next 12 months amid the emergence of AI-optimized devices.

“As the application of AI technology expands, the application of storage is also expected to increase, which will lead to even more stable storage market growth in the future,” Kim Woohyun, vp and chief financial officer at SK Hynix, said in a conference call to the outcomes.

In 2023, the memory market experienced a pointy downturn brought on by oversupply, weak end-market demand, and geopolitical tensions Fitch Ratings.

The company announced this last month It has began mass production its latest version of HBM chips and is aiming for delivery by the top of the 12 months.

When markets opened in South Korea on Thursday, shares of SK Hynix initially fell 0.4% but then recovered to rise 1.3%.

South Korean memory chip maker SK Hynix on Thursday reported first-quarter net profit of 1.92 trillion South Korean won ($1.39 billion). reverse a loss of two.58 trillion won in the identical period a yr ago.

This was the primary positive income for the reason that third quarter of 2022, LSEG data showed. SK Hynix posted five straight quarters of net losses as a consequence of a slump within the memory chip market.

Sales totaled 12.43 trillion won in the primary quarter, up 144% year-on-year. This was the very best sales for the reason that second quarter of 2022, in accordance with LSEG data.

SK Hynix attributed the strong performance to an “increase in sales of AI server products, supported by its leadership in AI storage technology, including high-bandwidth storage,” in addition to efforts to extend profitability.

SK Hynix is ​​the second largest memory chip maker on the planet after Samsung Electronics and supplies high-bandwidth memory chips for AI chipsets for corporations resembling Nvidia.

The explosive demand for AI chipsets boosted the marketplace for high-end memory chips, benefiting players like SK Hynix and Samsung Electronics hugely.

Large language models like ChatGPT – which led to a surge in AI adoption – require many powerful memory chips because these allow these models to recollect details from past conversations and user preferences to generate human-like responses.

To meet the demand for AI storage, the corporate plans to extend the provision of HBM3E – the newest generation of high-bandwidth storage for AI. SK Hynix said it’ll also introduce 32GB Double Data Rate 5 products this yr to strengthen its leadership within the high-capacity server DRAM market.

“We will continue to work to improve our financial results by delivering the industry's best-performing products at the right time and maintaining a commitment to profitability,” said Chief Financial Officer Kim Woohyun.

The company expects the general memory market to grow steadily in the approaching months amid increasing demand for AI memory, while the traditional DRAM market begins to get better from the second half of 2024.

Pandemic-related demand for consumer electronics led to corporations stockpiling memory chips. But macroeconomic uncertainties resembling inflation caused consumers to limit their purchases of such consumer goods, resulting in a decline in demand and costs for memory chips.

To address excess inventory, corporations like SK Hynix have cut production of their memory chips.

Shares of SK Hynix fell greater than 4% on Thursday morning, despite rising greater than 100% within the last yr.

The company recently announced plans to fulfill AI demand.

The company announced this on Wednesday plans to construct a brand new factory in South Koreawith an expected completion date of November 2025, to extend production of next-generation DRAM including HBM to fulfill the growing demand for AI chips.

The total investment would amount to greater than 20 trillion won in the long run, SK Hynix said.

SK Hynix also works with TSMC, the world's largest contract chipmaker, will construct high-bandwidth memory chips and next-generation packaging technology. Mass production of the HBM4 chips is scheduled to start in 2026.

According to an April 19 statement, SK Hynix will leverage TSMC's state-of-the-art processes.