SK Hynix Says 5-Year Big Tech Contracts Will Sustain AI Memory Boom After Record Q2 Profit

SK Hynix Tops 98 Trillion Won in First-Half Operating Profit

But Market Says Results Fell Slightly Short

Second-Quarter Operating Profit Hits Record 60.5 Trillion Won

Operating Margin at 76% Beats TSMC for Third Straight Quarter

SK Hynix posted more than 60 trillion won ($43.6 billion) in operating profit for the second quarter, driven by the boom in artificial-intelligence semiconductors. It was the highest quarterly operating profit in the company’s history. Its operating margin reached 76%, surpassing Taiwan Semiconductor Manufacturing Co. for a third consecutive quarter. Even so, the market response was mixed.

SK Hynix said on July 29 that consolidated second-quarter revenue was 79.3187 trillion won ($57.1 billion) and operating profit was 60.5426 trillion won ($43.6 billion). That was up 256.8% and 557.2%, respectively, from a year earlier. First-half revenue totaled 131 trillion won ($94.3 billion), while operating profit reached 98 trillion won ($70.5 billion). AI memory chips including sixth-generation high-bandwidth memory, or HBM4, SOCAMM2 and enterprise SSDs drove the results. Higher selling prices for mainstream DRAM including DDR5 and for NAND, along with increased shipments, further boosted profitability.

The company said operating profit came in slightly below the market estimate of 63.6 trillion won ($45.8 billion) because shipments of some high-value products were pushed into the second half. It said earnings growth would accelerate later this year as HBM4 shipments ramp up. SK Hynix also rejected concerns that AI demand has peaked. It said earnings momentum would strengthen in the second half. The company added that it completed negotiations in the second quarter on five-year long-term supply contracts with more than 10 global big tech companies.

Record 60.5 Trillion Won in Second-Quarter Operating Profit

Signs 5-Year Contracts With Nvidia and Others, Rejects Oversupply Risk

One of the main points SK Hynix stressed on a conference call after releasing earnings on July 29 was demand for memory semiconductors beyond the second half. The company sought to push back against concerns about chip oversupply and a post-peak slowdown. Despite reporting record quarterly earnings, it faced unease in parts of the market and repeatedly emphasized that semiconductor demand would keep growing.

HBM4 Yield Nears Mature HBM3E Levels

SK Hynix said second-quarter revenue was 79.3187 trillion won ($57.1 billion) and operating profit was 60.5426 trillion won ($43.6 billion), up 256.8% and 557.2% from a year earlier. High-performance AI memory products such as sixth-generation HBM4 and SOCAMM2 led the record results. Kim Ki-tae, vice president in charge of HBM sales and marketing, said the company began supplying HBM4 to major customers in the second quarter and is steadily ramping up production capacity. He said HBM4 mass-production yields and quality are now close to HBM3E, which has already reached a mature stage. On the NAND business, Kim said demand for enterprise solid-state drives is rising rapidly, led by AI data centers. That growth is expected to continue. The company plans to raise 321-layer NAND to about 50% of domestic production capacity by year-end.

At the same time, higher prices and shipment volumes for mainstream DRAM and NAND products, including DDR5, low-power DRAM LPDDR5X and graphics DRAM GDDR7, helped maximize profitability. In the second quarter, SK Hynix’s average selling price rose about 30% from the previous quarter for DRAM and by the mid-50% range for NAND. Shipment volumes also increased, with DRAM up in the high-single-digit percentage range and NAND up in the mid-teen percentage range. The company plans to increase DRAM shipments by about 10% in the third quarter from the prior quarter, while NAND shipments are set to rise by the low-single-digit percentage range.

Additional Shareholder Returns Under Review

After reporting record earnings, SK Hynix provided further detail to address market concerns about a peak-out. A key example was its long-term supply agreements with big tech companies. The company said it completed long-term agreement negotiations in the second quarter with more than 10 global big tech firms, including Nvidia. It is also continuing discussions on additional contracts with major customers. SK Hynix said five years is typically the standard term for such agreements and that it plans to manage short-, medium- and long-term volumes at appropriate levels based on market conditions and customer demand. Song Hyun-jong, president of SK Hynix’s corporate center, said ties with big tech companies are evolving beyond simple supply deals into strategic partnerships built around shared technology road maps.

On concerns about oversupply and the rise of latecomers such as China’s ChangXin Memory Technologies, or CXMT, the company said the risk was low. Song said memory demand within the AI ecosystem will continue and that the chance of medium- to long-term investment leading to oversupply is limited.

The company said it will step up expansion of HBM4 production capacity and development of next-generation technologies in the second half. Kim said SK Hynix has secured stable production capacity and is in talks with major customers over next year’s supply volumes and pricing.

SK Hynix is also reviewing additional shareholder return measures based on its record cash generation and profit growth. It plans to disclose details on the method, size and timing within this year once they are finalized. The company said it will also review whether to expand the share of American depositary receipts, taking into account the regulatory environment and other factors.

Kang Hae-ryeong / Kim Chae-yeon / Won Jong-hwan, Hankyung.com reporters hr.kang@hankyung.com