By Joyce Lee and Hyunjoo Jin
SEOUL (Reuters) -South Korea's SK Hynix forecast sales of its high-end semiconductors used in generative artificial intelligence chipsets would double this year after reporting a record quarterly profit that surpassed its bigger rival Samsung (KS:005930).
Shares in SK Hynix, a key supplier to AI chip giant Nvidia (NASDAQ:NVDA), however, dropped 3% on Thursday as the company warned of steeper demand declines in commodity memory chips used in smartphones and computers, due to economic uncertainty and growing competition from Chinese rivals.
Before the result, SK Hynix shares had jumped about 30% so far this year on bullish sentiment driven by its business discussions with Nvidia, outperforming Samsung, whose shares rose 2% over the same period.
"Uncertainties exist for the memory chip market this year as trade protectionism grows and geopolitical risks deepen, while PC and smartphone companies adjust inventories," SK Hynix Chief Financial Officer Kim Woo-hyun told analysts on an earnings call.
The company said supply will remain tight for high-performance chips as a result of rising demand, but demand declines will accelerate for legacy products.
Lee Min-hee, an analyst at BNK Investment & Securities, said while fourth-quarter results were strong, SK Hynix's forecast for first-quarter chip shipments was weaker than expected and disappointed investors.
"I had forecasted just above 6 trillion won operating profit for Q1, but now I'm expecting around 5.5 trillion won," Lee said.
SK Hynix said its shipments of DRAM and NAND flash memory chips would decline by between 10% and 20% in the first quarter from the previous quarter.
STRONG AI CHIP SALES
The world's second-biggest memory chipmaker posted an operating profit of 8.1 trillion won ($5.64 billion) in the October-December quarter, slightly above expectations and exceeding Samsung's forecast fourth-quarter operating profit of 6.5 trillion won.
This is the first time that SK Hynix's quarterly operating profit beat Samsung's total operating profit, analysts said, as its rival lags in supplying high-end high-bandwidth memory (HBM) chips to Nvidia.
The company said HBM chips accounted for 40% of its total DRAM revenue in the fourth quarter. Overall, its revenue for the quarter rose 75% year-on-year to 19.8 trillion won, while its operating profit was up more than 20-fold from a year earlier when it was coming out of the biggest chip industry downturn in over a decade.
SK Hynix has been increasingly outperforming rivals Samsung and U.S.-based Micron Technology (NASDAQ:MU) in recent quarters, as it benefits the most from AI-driven appetite for high-end memory chips following its early entry and large investments in HBM chip development.
But SK Hynix told analysts its 2025 capital expenditure would rise only slightly from last year, with investments focusing on HBM production and new factories in South Korea.
"SK Hynix’s conservative capex plan for HBM chips fuelled concerns about slowdown in demand," Jung Min-gyu, an analyst Sangsangin Investment & Securities said.
A SK Hynix executive said the company had already begun supply talks for 2026 for the HBM chips used in AI chipsets and expected to have better visibility in the first half about shipment plans for next year.
"The AI industry has a potential to grow above most expectations and would require huge computing power. There's no doubt about long-term demand for HBM chips," the executive said.
SK Hynix said it began supply of 12-layer HBM3E chips, the most advanced HBM model currently in mass production, to a customer in the fourth quarter.
It expects it will start supplying even more advanced 16-layer HBM4 chips in the second half of 2026 and that Chinese rivals will face difficulties in developing advanced chips due to U.S. restrictions.
($1 = 1,435.1200 won)