Five-year supply deals, sustained Big Tech spending underpin W40tr-plus investment plan
SK hynix pushed back Wednesday against concerns that the AI memory boom is nearing its peak, citing five-year supply agreements, sustained Big Tech investment and growing demand beyond high-bandwidth memory.
On its second-quarter earnings call, the chipmaker said it has completed long-term supply agreements with 10 customers, giving it greater visibility as it commits tens of trillions of won to new capacity.
“We expect AI infrastructure investment to remain solid beyond next year as competition among cloud service providers continues and AI services expand,” said Park Joon-deok, head of DRAM marketing at SK hynix.
The company reported record second-quarter revenue of 79.32 trillion won ($54.8 billion), up 256.8 percent on-year and 51 percent from the previous quarter. Operating profit surged 557.2 percent to 60.54 trillion won, exceeding its full-year 2025 operating profit of 47.21 trillion won. Its operating margin reached 76 percent.
Net profit jumped 1,242.5 percent to 93.92 trillion won, boosted by gains from the sale and revaluation of investment assets, largely its stake in Japanese flash-memory maker Kioxia.
SK hynix expects second-half bit shipments to grow faster than in the first half as HBM4 production ramps up and shipments of commodity DRAM built on its 1c-nanometer process increase. A richer mix of high-value products is also expected to lift its blended average selling price.
The record results offered little support to SK hynix shares amid a broader market rout. The stock fell as much as 20.9 percent to an intraday low of 1.24 million won, as another Kospi circuit breaker halted trading.
Long-term contracts support expansion
SK hynix argued that the memory upcycle is being supported by structural supply constraints and unusually strong demand visibility, rather than short-term price increases alone.
The long-term agreements provide firmer purchase commitments as the company expands production, reducing its exposure to swings in the memory cycle.
Park said contracts typically run for about five years, though terms vary by customer and product. They include medium- to long-term volume commitments and, in some cases, deposits intended to strengthen execution.
“The focus is on reducing uncertainty from short-term market fluctuations and securing greater business stability for both customers and ourselves,” Park said.
The company is also discussing pricing structures designed to absorb market volatility rather than relying on a single fixed formula, he added.
SK hynix said the contracts and customer discussions underpin its major expansion projects, including the M15X fab, the Yongin semiconductor cluster and the P&T7 advanced packaging facility.
The company rejected concerns that these investments could eventually create excess supply, saying equipment purchases and capacity additions would be phased according to confirmed demand and investment efficiency.
AI monetization gains pace
SK hynix also addressed concerns that reviews of data center leasing plans by some major technology companies, along with the rise of more efficient AI models, could signal a slowdown in infrastructure spending.
“We see these moves not as a reduction in AI investment, but as part of the process of improving the utilization of infrastructure built on a large scale and accelerating monetization,” Park said.
More efficient models could lower the cost of AI services, broaden adoption and ultimately increase computing demand, he added.
Power shortages and delays in data center construction may affect individual projects. But SK hynix expects continued competition among cloud providers and the spread of AI services to sustain infrastructure investment beyond next year.
The company said this would support demand not only for HBM, but also for server DRAM used in agentic AI workloads and high-capacity NAND needed to store growing volumes of AI data.
Against that backdrop, SK hynix plans to raise capital expenditure this year to well above the 40 trillion won range, more than 15 trillion won above last year.
herim@heraldcorp.com