The AI-driven memory supercycle is propelling South Korea's semiconductor industry to unprecedented profit peaks. SK Hynix is set to announce its second-quarter results on July 29, with Q2 operating profit expected to reach a historic high.
According to market consensus compiled by Yonhap Infomax from reports by 14 securities firms over the past month, SK Hynix's second-quarter revenue is projected at 84.06 trillion won, with operating profit estimated at 64.09 trillion won, marking a nearly 600% year-on-year increase and potentially setting a new record. Meanwhile, the operating profit margin is expected to rise from 72% in the previous quarter to between 75% and 77%, a rare feat in the manufacturing sector.
Earlier this month, Samsung Electronics reported preliminary results, with its semiconductor division (DS) driving Q2 operating profit to 89.4 trillion won. If SK Hynix meets expectations, the combined operating profit of the two companies for the second quarter would exceed 150 trillion won. Samsung Electronics will disclose detailed financial data by business segment on July 30, the day after SK Hynix's earnings release.
Despite robust fundamentals, the company's stock price has fallen over 30% from its peak, making the earnings report a key focus for investors assessing whether it can restore market confidence. Given the divergence between market capitalization and earnings performance, investors are now eyeing the Q2 earnings release on the 29th and management's guidance for the second half of the year to evaluate whether this valuation discount can be corrected.
Supercycle Extended, HBM Leadership Drives Growth
Analysts attribute SK Hynix's stellar performance to the prolonged memory supercycle that began in the second half of last year.
Specifically, the main drivers for the earnings surge include continued price increases for general DRAM in Q2, expanded HBM sales, and a surge in enterprise SSD demand driven by increased AI data center investments from North American cloud service providers (CSPs), which significantly boosted NAND prices.
Kim Dong-won, head of KB Securities' research division, noted that with HBM capacity expansion, the supply capacity of general memory will effectively remain constrained. Meanwhile, as the proportion of long-term agreements (LTA) increases, the share of sales to major tech companies and AI data centers is expected to rise to 70%. He further stated that with reduced earnings volatility and enhanced earnings predictability, SK Hynix's valuation is likely to improve.
Notably, B2B sales accounted for only 30% in 2017 but are projected to reach 70% by 2027. Analysts believe that the memory growth cycle from 2026 to 2027 will differ significantly from the 2017-2018 cycle in terms of revenue structure, with a substantial increase in B2B sales centered on major tech companies and AI data centers, leading to markedly improved earnings quality and stability.
Profit Margin Could Surpass TSMC, Financial Structure Improving
If these predictions materialize, SK Hynix's operating profit margin of 75% to 77% would mean retaining over 7,500 won in profit for every 10,000 won in product sales—a level extremely rare in manufacturing and would surpass foundry leader TSMC for the third consecutive quarter.
SK Hynix first surpassed TSMC's 54% operating margin in the fourth quarter of last year with 58%. Considering TSMC's Q2 operating margin of 60.3%, the gap between the two is expected to widen further to approximately 15 to 17 percentage points.
In terms of financial structure, SK Hynix returned to a net cash position (cash assets exceeding borrowings) in the third quarter of last year, the first time since 2019. By the end of the first quarter, net cash had grown to 35 trillion won. Analysts expect net cash to expand further in the second quarter, strengthening financial stability.
Additionally, SK Hynix plans to issue productivity incentive (PI) payments on July 30. PI, along with profit-sharing (PS), are the company's two major performance-based bonus systems, distributed twice a year. Based on operating profit margin criteria, the PI for the first half of this year is expected to be set at 150% of the monthly base salary, reaching the maximum under the system.
Analysts note that if SK Hynix's Q2 operating profit reaches 64 trillion won, combined with Q1's 37.61 trillion won, the company's first-half operating profit alone would exceed 100 trillion won. This figure would also surpass SK Hynix's full-year operating profit of 47.2 trillion won last year by approximately 17 trillion won.
The combined quarterly operating profit of Samsung Electronics and SK Hynix exceeding 150 trillion won marks a new historical phase for South Korea's memory industry, driven by the AI wave.
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