SK Hynix Sees Demand for Memory Chips Increase Thanks to AI

SK Hynix posted an improved Q2 earnings report with a positive outlook for the memory market. Surging AI growth has increased demand for high-end DRAM chips, which could help pull the wider market into recovery.

The beleaguered memory chip market may be poised to recover according to leading chipmaker SK Hynix. The firm’s second-quarter earnings report shares a positive outlook for the market, largely thanks to AI.  

The South Korean chipmaker’s head of DRAM marketing said in a company earnings call, “We have long-range visibility [on AI-driven demand] from our clients into next year.”

Notably, the artificial intelligence (AI) wave sweeping the global economy has been a boon for most of the chip industry. Memory chips, particularly High Bandwidth Memory (HBM) are a crucial component of GPUs and AI accelerators. Thanks to this, the memory market is seeing renewed interest after demand for consumer products vanished in the wake of the COVID-19 pandemic.

AI Drives High-End DRAM Demand

SK Hynix posted a much more encouraging quarter than its operating loss of $2.28 billion would make it seem. In the same frame last year, it posted $3.1 billion in profit. However, this is an improvement over the $2.6 billion operating loss it saw in Q1. Year-over-year, the firm saw its revenue fall sharply by 47% in the second quarter.  

Such clear signs of a weak memory market aren’t new as unfavorable pricing and sagging demand thanks to an industry-wide supply glut force chipmakers to reevaluate their positions.  

Indeed, numerous memory chip firms, including SK Hynix and Samsung, were forced to cut production earlier this year. The move was intended to put a halt to plummeting prices and let buyers work through some of their existing inventory.  

Now, conditions in the memory market are variable depending on the type of chip in question. NAND Flash continues to struggle. SK Hynix plans to further slash production of these chips by an additional 5% to 10% beyond its original reduction. Conversely, high-end DRAM chips are seeing a resurgence thanks to demand from the AI sector. The chipmaker claims it saw demand for AI server memory more than double in Q2 compared to Q1.  

SK Hynix maintains strong control over the high-end DRAM market. TrendForce research pegs the South Korean firm’s market share at 50% while its nearest competitor, Samsung, holds on to 40%. Micron rounds out the sector with a meager 10% of the overall market.

Uneven Memory Market Recovery

Moving forward, SK Hynix expects the memory market to recover slightly, although that progress won’t come for every segment. As noted, NAND Flash memory continues to see weak demand with no reprieve in sight.  

Hyundai Motor Securities research head Greg Roh said in a statement, “NAND Flash demand from Chinese mobile firms may continue to stagnate until year-end.” This sentiment has been echoed by others in the industry, including executives from TSMC, who project a weaker-than-average Q4 despite upcoming iPhone launches.  

Fortunately, skyrocketing demand for AI chips could be strong enough to swing the memory market back into profitability. Though far from certain, SK Hynix could see a return to positive numbers by the end of the year on the back of its high-end DRAM products. Investors are confident in a recovery and sent the stock’s price upward following the Q2 announcement to top a 50% increase year-to-date.  

As the chip industry continues adjusting to the sudden shift toward AI, firms like SK Hynix stand to benefit. Indeed, the technology’s growing presence, widespread impact, and hungry demand for chips will be a boon for the industry over the next several years. Whether AI can offset larger problems within the memory market in the long term remains to be seen. For now, though, SK Hynix and other memory chip producers can breathe a sigh of relief.

Author of article
Sourceability Team
The Sourceability Team is a group of writers, engineers, and industry experts with decades of experience within the electronic component industry from design to distribution.
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