SK Hynix Inc. has reported better-than-expected revenue, signaling that the memory chip market is recovering due to the increasing interest in artificial intelligence (AI). The South Korean supplier to Apple Inc. and Nvidia Corp. is planning to ramp up the production of high-end chips to meet the rising demand driven by AI, despite warning that overall demand remains weak.
In the June quarter, Hynix generated sales of 7.31 trillion won ($5.7 billion), which is a 47% decrease compared to the same period last year. However, it exceeded the average estimate of 6.05 trillion won. The company’s operating loss for the quarter was 2.88 trillion won, in line with the expected loss of 2.86 trillion won.
During early morning trade in Seoul on Wednesday, Hynix shares rose approximately 1%. Hynix, along with Samsung Electronics Co. and Micron Technology Inc., has experienced challenges over the past two years due to a significant decline in demand for memory chips used in smartphones, servers, and computers since the onset of the COVID-19 pandemic.
Hynix has been able to recover some of its losses this year, with a 51% gain through Tuesday’s close. This is largely attributed to expectations of output cuts and improved economic conditions that could lead to higher industry prices. The company also mentioned the increased demand for AI server memory, driven by the expansion of the generative AI market.
Despite the challenges faced by the memory chip industry, Hynix has maintained its target to reduce capital expenditure by at least 50%, compared to 2022. It also plans to further reduce NAND production while investing in expanding the production capacity of high-density DDR5 and HBM3 chips.
Executives at Hynix have expressed optimism about sales rebounding in the June quarter and improved market conditions for the memory industry in the second half of the year. However, it is uncertain when the industry will fully recover, as it is heavily influenced by factors such as the Chinese economic rebound and the global demand for AI-driven data centers and servers.
The ongoing US-China conflict over technology and semiconductors could also impact the industry. Increased scrutiny from Beijing on foreign chip manufacturers has raised concerns. China is a significant export destination and production base for companies like Samsung and Hynix. Currently, Hynix and Samsung operate in China under a one-year waiver or license for equipment imports.