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) 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

• Warning! GuruFocus has detected 3 Warning Sign with FRA:HY9H.

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.