SK Hynix sent a clear signal during its latest earnings call: the tight supply situation in the memory market is set to continue. The company is pushing production of high-end products to its maximum but still cannot fully meet client demand, a supply-demand dynamic expected to persist into the second half of this year. SK Hynix stated that its fourth-quarter DRAM inventory saw a significant year-on-year decline, with products being shipped to clients immediately after production, leaving almost no room for inventory accumulation. The company anticipates that DRAM inventory will shrink further as the year progresses into the second half, meaning the tight supply situation for clients could continue for some time. Regarding its high-bandwidth memory (HBM) business, SK Hynix revealed that despite currently maximizing production of HBM4, it is still struggling to fully satisfy client demand. The company aims to secure an overwhelming market share in HBM4, continuing the dominance it established with its HBM3 and HBM3E products. Furthermore, while adopting a cautious stance toward large-scale manufacturing expansion in the United States, the company has announced plans to invest $10 billion to establish an AI solutions company there. This venture will leverage advanced chip technologies, including HBM, to provide optimized AI systems for data center clients. The memory supply remains persistently tight. SK Hynix elaborated on the current supply situation during the call. The company's DRAM inventory experienced a substantial year-on-year decrease in the fourth quarter, with produced goods being dispatched to clients immediately, allowing minimal space for inventory build-up. The company further indicated that DRAM inventory is projected to contract further in the second half of this year, suggesting that the supply constraints for clients might last for a considerable period. In the NAND flash sector, SK Hynix noted that inventory, primarily for solid-state drives (SSDs), has been declining since the latter half of last year and is now at a level comparable to that of DRAM. HBM4 Strategy: Targeting an Overwhelming Market Share SK Hynix's supply strategy for HBM4 became a focal point of the earnings call. The company stated its goal is to capture an overwhelming share of the HBM4 market, extending the leadership position it achieved with its HBM3 and HBM3E products. The company emphasized that its competitiveness in the HBM market is not limited to technological leadership. Since the HBM2E era, it has helped shape the market through close collaboration with clients and infrastructure partners. SK Hynix stated that its accumulated mass-production experience and the trust earned in product quality represent advantages that are difficult to replicate in the short term. To achieve its goal of securing an overwhelming market share, SK Hynix is focusing on raising the yield rate of HBM4 to a level comparable to its previous 12-layer HBM3E product, striving to take a leading position in the HBM4 market. Production at Full Capacity Still Falls Short of Demand Despite operating at full capacity, SK Hynix admitted that supply remains tight. The company stated it is currently maximizing production but still finds it challenging to meet all client demand entirely and anticipates some competitors will enter the market. However, SK Hynix stressed that its market leadership and position as a leading supplier will endure. Regarding HBM4 technology, SK Hynix indicated that using its 10-nanometer-class fifth-generation (1b) process, applied to existing products, already meets client performance requirements. The company added that it aims to capture demand by leveraging its proprietary packaging technology. On the issue of overseas expansion, SK Hynix displayed a cautious attitude. Concerning anticipated US semiconductor tariffs, the company said it is currently monitoring discussions between the South Korean and US governments. It noted that investing in overseas semiconductor wafer fabs involves numerous internal and external variables that must be carefully evaluated, and it will share its future direction at a later stage. Notably, despite its cautious stance on large-scale US manufacturing expansion, SK Hynix has formulated a plan for selective investment. The company announced it will establish an AI solutions company in the United States, tentatively named AI Company (AI Co.), which will utilize advanced chip technologies, including HBM, to provide optimized AI systems for data center clients. SK Hynix stated it will commit $10 billion to this venture, deploying the capital through a capital call method.
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