SK hynix, Inc. Q1 FY2026 earnings call

AI technology is evolving into inference and agentic AI stage, driving demand for broad range of memory products. Company plans to actively respond to demand for high-density server modules and mobile products in Q2, with DRAM shipments expected to increase by a high single-digit percent QOQ and NAND shipments to increase by a mid-10% QOQ. Concentrating efforts on further strengthening capabilities in HVM business. In DRAM, completed development of industry's first 1C nanometer-based LPDDR6 and began mass production of 192GB SOCAM2 product. In NAND, begun supply of PQC21 client SSD and will build well-balanced product lineup. CAPEX this year is expected to increase significantly with majority allocated to infrastructure preparation centered on Yongin Cluster and ramp-up of M15X and procurement of key equipment such as EUV tools.

First quarter revenue increased by 60% QOQ and 198% YOY to 52.6 trillion won. For DRAM, shipments in Q1 were similar to Q4 levels, focused sales on products with robust demand including HBM and high-density server modules, and ASB rose by a mid-60%. For NAND, shipments declined by approximately 10% QOQ, but ASB rose sharply by mid-70%. First quarter operating profit reached 37.6 trillion won, increasing nearly twofold from the previous quarter. Operating margin improved by 13 percentage points QOQ to 72%.

Expect a favorable pricing environment to continue for the time being. For Q2, DRAM shipments expected to increase by a high single-digit percent QOQ, NAND shipments expected to increase by a mid-10% QOQ. HBM4 planned to ramp up volume in line with agreed schedule. LPDDR6 planned to begin full-scale market supply in second half.

Geopolitical changes pose risks to commodities and energy supply, but company has diversified suppliers for key industrial gases, built up sufficient inventory for tungsten, and sources LNG through long-term agreements to minimize impact.

Q: The memory spot prices have been on a steep upward trend, but are now showing some signs of weakness. Some are concerned that this may be a signal of a peak out with the demand beginning to soften due to the price burden. But does the company see this as just a temporary adjustment caused by short-term supply and demand factors?

A: The spot market takes up a very small part of the overall DRAM market. The company sees memory demand from major customers increasing across the board. Suppliers find it hard-pressed to increase supply in short term, so supply-demand imbalance persists and rising memory price cycle is likely to last longer.

Q: Currently, the current super cycle is continuing to lead to a strong rise in the price of memory. What do you think the overall memory price flow will be in the future?

A: The price increase in memory is driven by structural changes in the market, not temporary supply-demand imbalance. AI makes memory more important, IT companies are competitively increasing purchases. Industry supply has been constrained, suppliers are expanding investment but it will take time. Favorable pricing environment is expected to continue for the time being.

Q: Could you provide us an update on the current progress on your enhanced and new long-term agreements and the timeline for their expansion?

A: Customer requests to secure medium to long-term supply volumes have increased. Multi-year LTA must provide business stability for both parties. Due to current supply restrictions, limited from accommodating all customer requests. If successfully established, expect investment efficiency to improve and reduce memory industry volatility.

Q: I think there is a concern that efforts to improve technology and product development to respond to lack of memory supply will reduce our memory consumption in the future. What is the company's opinion?

A: Technological advancements will broaden the AI ecosystem and drive memory demand. LPUs using SRAM have limits, likely move toward hybrid architecture. Memory optimization technologies aim to use memory more efficiently, more memory required as AI services diversify.

Q: Regarding the HBM4 qualification and mass production, what is the update on HBM4 qualification and the expected timing for full-scale shipment?

A: HBM4 established proactive development and supply system with major customers, getting ready to ramp up production. Demand for next three years far exceeds supply capacity. Will sustain market leadership based on product capabilities including HBM3E and HBM4.

Q: Does the company also plan to expand investment to maintain market share and competitiveness?

A: Company plans to execute investment with CapEx discipline, taking demand visibility into account. Investment in 2026 to increase significantly YOY to prepare future infrastructure and secure key equipment. Actively expanding supply to meet customer demand, but supply will remain short of demand for time being.

Q: With demand driven by AI expected to fuel rapid growth in NAND demand, what is SK Hynix's plan to meet future market demand?

A: Developed world's first 321 layer QLC in April, completed customer certification. Aim to flexibly address AI storage demand with optimal product lineup. Accelerate tech migration, migrate more than 50% of domestic production to 321-layer technology by end of year.

Q: How is the company preparing for such next-generation memory market post-HBM?

A: Plan to begin mass production and supply of 192GB SOCAM2 product based on 1C nanometer LPDDR5X. Continue to develop CXL's 2.0-based solutions. In NAND, preparing next-generation storage solutions, launched consortium for HBF standardization.

Q: What are the key factors that will contribute to the company's technological competitiveness in the HBM4E?

A: Preparing HBM4E in close consultation with customers regarding shipment schedule and product specifications. Internal plan to start supplying samples in second half of year, targeting mass production in 2027. Base die under development based on optimal technology, 1C nanometer technology adopted, yield and mass production capabilities mature.

Q: What is the operational direction for the Y1FAB, which is scheduled to open early next year?

A: Decided to shorten the first phase of the base-1 clean room opening in Yongin Fab from May 2027 to February 2027. Yongin Cluster will be core of mid-term operation, Phase 1 to produce DRAM, products and techs for Phases 2-6 reviewed for efficient operation. No additional fab construction or acquisition plans outside Yongin currently.

Q: What is the impact of shortages of commodities like helium, bromine, tungsten, and LNG on the company, and what is the company's strategy to secure supply?

A: Company aware of risks from geopolitical changes. Diversified suppliers for key industrial gases, built up sufficient inventory for tungsten. Sources LNG through long-term agreements. Impact on production capacity limited. Continue to monitor market conditions.

Q: What is the company's direction or plan for shareholder return policies? And could you give us an update about ADRs?

A: Given enhanced profit-generating capability, can balance financial soundness and expanding shareholder returns. Plan to develop additional shareholder return measures within this year including share buyback and cancellation. US SEC review of ADR is in progress, will communicate more details once finalized.