SK Hynix sells out AI memory chips through 2029 on record revenue

Record-breaking quarterly growth

SK Hynix, a major South Korean semiconductor manufacturer, recently reported a historic financial quarter. The firm registered revenue of 104.62 trillion won, which is approximately USD 78.09 billion. This marks the first time the company has crossed the 100 trillion won threshold in a single quarter.

The financial results were driven largely by the expanding sales of high-bandwidth memory (HBM) chips and server DDR5 units. These components are essential for the high-speed data processing required by modern artificial intelligence systems. As a result, the company's operating profit surged by 632.1 per cent compared to the previous year.

The quarterly operating margin reached 79.7 per cent, significantly exceeding what analysts had projected. This performance highlights the massive scale of the current shift toward AI-centric computing. The company's net profit also touched 39.78 trillion won, or roughly USD 29.69 billion, during this period.

A multi-year supply backlog

The demand for AI memory is so high that SK Hynix has effectively sold out its DRAM and HBM chips through 2029. The company has secured contracts that cover upwards of 50 per cent of its production capacity for the years 2027 and 2028. This means that for a significant portion of the next few years, the company's output is already spoken for by major customers.

The firm is currently managing a situation where customers are requesting more than twice the volume that the company can actually supply. Kim Ki-tae, the head of HBM sales and marketing, noted that the medium- to long-term demand outlook for these chips remains unchanged. This indicates that the hardware shortage is not a temporary spike but a sustained trend in the semiconductor industry.

To manage this, the company is retaining the remaining output of its capacity to adapt to potential market shifts. This strategy allows them to fulfill guaranteed contracts while keeping some flexibility for new opportunities. The company also expects HBM4 chips to surpass HBM3E in both shipment volume and revenue share starting in the fourth quarter.

Shareholder returns and capital

Despite the massive growth, SK Hynix is focusing on a specific framework for how it handles its profits. The company plans to return around 100 trillion won, or roughly USD 74.64 billion, to its shareholders this year. This will be achieved through a combination of increased dividends, share repurchases, and share cancellations.

Chief Executive Officer Kwak Noh-jung explained that the company aims to share gains with shareholders when strategic investments prove successful. He stated that these gains help replenish funds for future growth when new investments might temporarily limit available cash. This approach is designed to protect shareholder interests while still allowing the company to invest in sustainable growth.

The board recently cleared an additional 20 trillion won buyback, with half of that amount designated for share cancellation. Additionally, the company announced a third-quarter dividend of 20,000 won per share. These financial moves are backed by returns from Kioxia, a Japanese producer of flash memory, which is a joint venture in which SK Hynix holds an interest.

Industry outlook and hurdles

The broader semiconductor industry is facing a projected memory deficit that could last through 2030. This shortage is caused by the intricate fabrication steps required to build these chips and the long schedules needed to set up new factories. Because of these complexities, the supply of high-end memory cannot keep up with the pace of AI development.

Marketing head Park Joon-deok suggested that the improving AI revenue and cash flow of major customers will eventually ease concerns about their investment burdens. He believes that tangible business results will attract a wider range of investors to the AI space. This sustained interest is expected to keep memory demand far outstripping the available supply for the foreseeable future.

On the corporate side, SK Hynix has decided to defer an initial public offering on the Nasdaq for its NAND unit, Solidigm. The company decided to wait because of current financial market conditions and other factors. CEO Kwak Noh-jung noted that it would be difficult to achieve the anticipated benefits of the listing at this specific point in time.