Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SK Hynix Inc (FRA:HY9H, Financial) achieved record revenue of KRW17.57 trillion in Q3 2024, driven by strong demand for memory products in data centers.
- The company's operating profit increased by KRW1.56 trillion sequentially, reaching a record high of KRW7.03 trillion, with an operating profit margin of 40%.
- Sales of high-margin products like HBM and enterprise SSDs expanded significantly, contributing to improved profitability.
- The company reported a net profit of KRW5.5 trillion with a net profit margin of 33%, reflecting strong financial performance.
- SK Hynix Inc (FRA:HY9H) has successfully secured long-term contracts for HBM products, ensuring stable demand and pricing visibility for 2025.
Negative Points
- Demand recovery in conventional applications such as PCs and smartphones was delayed, impacting sales volume of conventional DRAM products.
- The company faced a decline in shipment volume due to weak procurement demand from PC and mobile customers.
- There is a potential risk of oversupply in the memory market due to aggressive capacity expansion by Chinese suppliers.
- SK Hynix Inc (FRA:HY9H) is experiencing limitations in production capacity to meet the rapidly increasing demand for HBM products.
- The company is carrying inventory for some products where demand is declining and prices are falling, which may impact future profitability.
Q & A Highlights
Q: With the continued slowdown in demand for mobile and PC, and the intensifying competition, how do you see the outlook for general-purpose DRAM products? Will the blended ASP be affected?
A: (CFO, Kim Mohan) The DRAM price volatility is increasing due to delayed improvements in PC and mobile demand and new entrants in the legacy market. However, there are significant differences in supply and demand dynamics between legacy products like DDR4 and premium products such as HBM and LPDDR5. We expect our blended ASP to continue improving due to the increasing share of high-value products like HBM.
Q: Can you explain the lower than expected bit growth for DRAM products in the third quarter?
A: (CFO, Kim Mohan) The lower than planned sales were mostly in PC applications, with DDR4 sales volumes declining. However, we sold more DDR5, which partially offset the lost volume. Our industry bit growth guidance was for a mid-single digit decline, but the actual result was a 10% decline, mainly in discrete and client SSD products.
Q: What is your view on the potential supply situation for HBM in 2025, given the possibility of delays and increased supply from competitors?
A: (CFO, Kim Mohan) Unlike general DRAM, HBM has a long-term contract structure with volume and pricing negotiations already completed for 2025. We have high visibility on demand, and given the strong demand for AI chips, we believe HBM demand will be higher than currently anticipated.
Q: How do you plan to respond to any additional demand for HBM beyond your current capacity?
A: (CFO, Kim Mohan) We are on track to more than double our HBM capacity this year compared to last year. We are making necessary investments to meet next year's volume requirements, but our production capacity is reaching its limits. We plan to transition legacy technologies to advanced processes to increase HBM production.
Q: What are your investment plans for NAND capacity in 2024 and 2025, especially if the market downturn is more severe than expected?
A: (CFO, Kim Mohan) Our investment for this year is expected to be in the mid to high KRW10 trillion range, slightly higher than planned, reflecting faster growth in HBM demand. For next year, investments are expected to be slightly higher due to stable supply needs for HBM and ongoing infrastructure projects. We will maintain a conservative investment posture until industry inventories normalize.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
