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SK Hynix Reports Surge in Profits Amid Strong AI Chip Demand
SEOUL (Reuters) – SK Hynix, a prominent supplier of high-bandwidth memory processors to Nvidia, has announced that its quarterly profit has more than doubled, driven by robust demand for artificial intelligence (AI) chips. The company expects only minimal effects from potential U.S. tariffs on its products.
The U.S. government has initiated an investigation into semiconductor imports, citing national security concerns due to heavy reliance on foreign manufacturing. Additionally, ongoing U.S. export restrictions on semiconductor products to China, which have cost Nvidia approximately $5.5 billion, have raised concerns about their impact on SK Hynix.
Kim Ki-tae, head of HBM sales and marketing at SK Hynix, assured stakeholders during an earnings briefing that the company’s sales plans for the year remain unchanged for key customers. These plans align with previously established contracts.
Although SK Hynix anticipates some fluctuations in demand for chips used in smartphones and personal computers, its optimistic outlook regarding limited repercussions from U.S. tariffs parallels a similar positive forecast from TSMC, the largest contract chip manufacturer globally, which is also benefiting from the AI surge.
In the first quarter, SK Hynix recorded its second-highest quarterly operating profit ever, soaring 158% to 7.4 trillion won (approximately $5.2 billion). This impressive performance was attributed to strong demand stemming from AI technologies and the stockpiling of chips in anticipation of possible tariff hikes.
The company’s revenue increased by 42% to 17.6 trillion won, surpassing analysts’ expectations reflected in the LSEG SmartEstimate, which predicted a profit of 6.6 trillion won.
Despite concerns from some analysts regarding potential weakened demand in the latter half of the year due to stockpiling trends, SK Hynix remains confident. The company believes that such a scenario is unlikely given the uncertain trajectory of potential tariffs.
“It’s improbable that demand pull-ins will escalate sufficiently to create inventory accumulation worries,” remarked Kim Kyu-hyun, head of DRAM Marketing at SK Hynix.
Looking ahead, SK Hynix anticipates that major tech companies will continue their investments in server chips as they strive to seize early advantages in the burgeoning AI market. In the smartphone sector, advancements in AI capabilities within new devices are expected to foster replacement demand, propelling sales of high-performance mobile DRAM chips.
Interestingly, while 60% of SK Hynix’s revenue comes from U.S. customers, the company indicated that the majority of its shipments are to non-U.S. destinations. For example, Apple manufactures iPhones in China and India, while Nvidia’s AI server products are produced in Mexico and Taiwan.
Additionally, SK Hynix has observed that cost-effective AI models being developed by China’s DeepSeek could lower entry barriers in the industry and foster increased competition, thereby enhancing the demand for high-density memory chips.
As the primary supplier of HBM chips crucial for AI, SK Hynix is navigating a competitive landscape, particularly as rival Samsung Electronics struggles to match the escalating demand. Although shares of SK Hynix experienced a 20% increase in value last year, they saw a slight decline of 1.2% recently, underperforming against the KOSPI index’s 0.5% drop.
($1 = 1,426.4500 won)
Source
finance.yahoo.com