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An unexpected profit in the last quarter of 2024

2023 was a tough year for Korean companies, especially in the memory chip sector. Yet, an unexpected turn of events happened in the fourth quarter of 2023 when SK Hynix, the world’s second-largest semiconductor memory chip maker (after Samsung Electronics), reported a positive operating profit after a long slump. 

For the three months ending in December 2023, SK Hynix disclosed an operating profit of 346 billion won ($260 million), rebounding from a 1.9 trillion won operating loss in the same period the previous year. Total revenue also experienced a notable surge, rising by 47.4%, to 11.3 trillion won during the same quarter.

These results surpassed market expectations, as FnGuide consensus predicted (based on estimates from 24 brokerage houses) 51.5 billion won in operating loss and revenue of 10.5 trillion won for the quarter.

The reason behind this “surprise” profit of memory chip

Despite the positive operating profit, SK Hynix faced challenges, as reflected in a net loss of 1.4 trillion won This primarily came from valuation loss from the company’s investment, as an indirect stake (through Bain Capital-led consortium) in The Japanese chipmaker Kioxia. 

Looking at the full year of 2023, SK Hynix marked an operating loss of 7.7 trillion won, with a total revenue decline of 27%, falling to 32.8 trillion won from 2022.

“We achieved a remarkable turnaround … in the fourth quarter following a protracted downturn, thanks to our technological leadership in the AI memory space,” said Kim Woohyun, chief financial officer at SK Hynix. (Source: Asia Nikkei)

It can be said that the earnings announcement comes as a result of SK Hynix strengthening its collaboration with Nvidia, a US chip design company to develop high-bandwidth memory chips and other AI processors.

SK Hynix expressed optimism about the future of HBM chip demand, especially with HBM3E – the most advanced type of HBM chip on the market.

“We are smoothly preparing for mass production of HBM3E as demand for the chips will occur in earnest this year. We plan to supply them during the first half” said an SK Hynix executive.