SK Hynix, a leading South Korean chipmaker, reported a record-breaking quarterly profit on Wednesday, significantly surpassing market expectations. The announcement of plans to return approximately 100 trillion won to shareholders propelled the company's shares to rise more than 8%.
The company's third-quarter results demonstrated remarkable growth, with revenue increasing by 327.9% compared to the same period last year. Operating profit surged by an impressive 632.1% year-on-year. Compared to the previous quarter, revenue rose 31.9%, while operating profit climbed 37.6%. This performance outshone the Kospi's 6.25% gain, marking a significant achievement for SK Hynix.
For the first time, SK Hynix's sales exceeded 100 trillion won in a quarter. The company announced plans to return approximately 100 trillion won to shareholders, which includes at least 30 trillion won in cash dividends and 60 trillion won in share buybacks and cancellations. This move underscores the company's commitment to enhancing shareholder value.
During an earnings call, Kwak Noh-Jung, CEO of SK Hynix, addressed the decision to pause the review of potential pre-IPO fundraising and IPO options for its U. S. subsidiary, Solidigm. He cited financial market volatility and a correction in semiconductor stocks as key reasons for this decision. Kwak noted that an IPO would not currently deliver the anticipated benefits for Solidigm.
SK Hynix also plans to return gains from its investment in Japanese chipmaker Kioxia to shareholders through a special dividend. The company approved a dividend plan that includes a special dividend funded by these gains. Additionally, SK Hynix will repurchase 20 trillion won in shares, with half set for cancellation this year. This follows the completion of a previously announced 40 trillion won share buyback, which will also be canceled soon.
Looking ahead, SK Hynix aims to raise its shareholder return target to more than 50% of cumulative free cash flow generated between 2025 and 2027. This strategy is driven by the expected momentum in AI investments, fueled by the growing adoption of AI services and a more diverse investor base.
Memory Market and Production Plans
The company anticipates a continued structural supply-demand imbalance in the memory market, where demand is expected to outpace supply. SK Hynix projects that HBM4, the sixth generation of high-bandwidth memory, will surpass HBM3E in shipments and revenue in the fourth quarter. Production at its M15X facility in Cheongju, South Korea, is ramping up to meet this demand.
Average selling prices for DRAM rose by a high-20s percentage from the previous quarter. This increase was driven by higher conventional DRAM prices and a growing share of higher-priced HBM4 sales. Shipments of server DDR5 memory chips, used in data center servers, rose more than 40% from the previous quarter.
SK Hynix has secured long-term agreements with 14 major customers, covering more than 50% of its production capacity for 2027 and 2028. The company expects memory demand to continue outpacing supply through 2030 and plans to significantly increase investment next year.
