Nvidia Supplier SK Hynix Sees First Profit In 5 Quarters, Credits AI Chip Demand

SK Hynix, a key supplier to NVIDIA Corporation NVDA, has reported its first profitable quarter in five, attributing the turnaround to soaring demand for AI chips.

What Happened: The South Korean memory chip manufacturer recorded a net profit of 1.92 trillion South Korean won ($1.39 billion) in the first quarter, a stark contrast to the 2.58 trillion won loss in the same period last year, CNBC reported. This marks SK Hynix’s first positive income since the third quarter of 2022.

The company attributes its strong performance to the increased sales of AI server products, driven by its leadership in AI memory technology, particularly high-bandwidth memory. This technology is crucial for AI chipsets, such as those used by Nvidia.

The demand for AI chipsets has significantly boosted the high-end memory chip market, benefiting major players like SK Hynix and Samsung Electronics.

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SK Hynix plans to meet the increasing demand for AI memory by boosting the supply of HBM3E, the latest generation of high-bandwidth memory for AI. The company also intends to introduce 32GB Double Data Rate 5 products this year to strengthen its position in the high-capacity server DRAM market.

"We will continue to work towards improving our financial results by providing the industry's best performing products at a right time and maintaining the profitability-first commitment," said Chief Financial Officer Kim Woohyun.

Why It Matters: The surge in AI chip demand is a result of the growing adoption of large language models like ChatGPT, which rely on high-performance memory chips to generate human-like responses. This trend has led to a significant increase in the demand for high-performance memory chips, benefiting companies like SK Hynix and Samsung Electronics, according to the report.

SK Hynix’s financial turnaround comes amid a broader resurgence in the South Korean semiconductor industry. In December, Samsung Electronics and the South Korean semiconductor industry experienced substantial growth, marking a significant rebound in production and shipments.

SK Hynix’s recent financial success is also tied to its strategic investments in the U.S. semiconductor industry. The company announced plans to invest $3.9 billion in an advanced chip-packaging facility in West Lafayette, Indiana, to mass-produce high-bandwidth memory (HBM), crucial for powering NVIDIA GPUs used in AI systems training, like ChatGPT.

This investment underscores the region’s growing appeal in the semiconductor sector, fueled by the Biden administration’s efforts to restore America’s global standing in chip manufacturing and the incentives from the $53 billion Chips Act.

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