SK Hynix Reports Narrower Q2 Loss Amid Robust AI Demand, Foresees Chip Recovery

South Korean chipmaker SK Hynix announced on Wednesday that it posted a second-quarter operating loss of 2.88 trillion Korean won ($2.24 billion), indicating a narrower loss compared to the previous quarter’s 3.4 trillion Korean won. The loss was primarily due to weak demand for memory chips. However, SK Hynix expressed optimism that the memory chip market is on the path to recovery, driven by robust demand for artificial intelligence (AI).

Despite the loss, SK Hynix reported that its revenue increased to 7.30 trillion Korean won in the second quarter, up 44% from the previous quarter’s 5.08 trillion Korean won. The company attributed the revenue growth to increased sales of premium products such as HBM3 and DDR5.

The demand for memory chips plays a crucial role in the growth of the AI market. These chips enable generative AI models, such as ChatGPT, to retain information from past conversations and user preferences, enabling them to generate more human-like responses. SK Hynix expects the AI market to continue expanding, which will drive demand for AI server memory and contribute to the recovery of the memory chip market.

SK Hynix is the second-largest producer of dynamic random-access memory (DRAM) chips globally, after Samsung Electronics. The company intends to reduce its capital expenditure in 2023 by 50% to adjust production levels and combat weak demand for memory chips. Other industry players, including Samsung and Micron, have also announced similar capital expenditure cuts.

Although the prices of general DRAM products, such as DDR4, have been declining due to sluggish demand from PC and smartphone markets, SK Hynix reported an increase in the blended average selling price of DRAM in the second quarter. This was primarily driven by the higher sales of high-end products used in AI servers.

SK Hynix anticipates that the demand for AI memory will remain robust, and it expects a clearer impact of production reduction by memory companies in the near future. Despite the challenging market conditions, analysts believe that SK Hynix will benefit from the ongoing AI boom and expect memory chip prices to recover in the latter half of the year.