SK Hynix reported Q423 revenues of 11.31 trillion won, up 25% QoQ and up 47% YoY. They recorded an operating profit of 346 billion won, marking the first quarter of profit following four straight quarters of losses.
Net income remained negative however, at 1.38 trillion won. For 2023 as a whole, SK Hynix’s losses amounted to a staggering 9.14 trillion won, or $6.8 billion. Ouch! This was their worst performance in over a decade.
SK Hynix’s strong performance was attributed to soaring demand for their leading edge DDR5 and HMB products
SK Hynix said that sales of its main products, DDR5 and HBM3, increased by more than four and five times, respectively, compared with a year earlier
The company registered strong QoQ ASP growth of high teens for DRAM and a whopping 40% for NAND. It was interesting to note that bit growth was only in the low single digits percentage QoQ for DRAM. Given the insatiable demand for DDR5 in particular, this suggests they are capacity constrained on their leading edge DRAM.
Interesting also that NAND bit shipments fell in the low single digits percentage QoQ. This suggests that they are prioritising ASP growth over bit shipment growth, i.e. refusing to sell product below cost, even if it brings in much needed revenue. Smart move. I’ve long been of the view that this practise only serves to feed a downward spiral of ever lower prices from which you can never recover. As we previously noted here:
Large increases in NAND bit shipments accompanied by still-falling ASPs is the same negative feedback loop that’s playing out in Micron’s back yard. As long as customers keep stocking up on NAND inventory at ever lower prices, there’s no path back to profitability for the manufacturers.
While it was clearly an excellent quarter for SK Hynix, not all of its financial performance was as a result of an improving business environment. We discuss this, their outlook for PC, Smartphone and Server in 2024, their CapEx plans and what we think is an inflection point in their business model going forward, a pivot towards custom memory solutions. All behind the paywall. Thanks as always for reading!
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