Alphabet, Microsoft (MS), Meta and other U.S. big tech corporations are rushing out proposals to help fund the construction of fabs (semiconductor plants) worth tens of trillions of won and to cover the expense of purchasing extreme ultraviolet (EUV) lithography equipment, but SK hynix is politely declining while using such offers as leverage for long-term supply contracts. With investment money already abundant, the company sees no reason to risk shaking its current status as a "super supplier (super Eul)."
According to the industry on the 27th, SK hynix recently received proposals from Alphabet, MS and Meta to support capital expenditures for memory semiconductor facilities, but management is reportedly not considering them as practically executable options. The biggest stumbling block is that building a fab with funding from a specific big tech corporation would create a contractual structure that entails an obligation to supply exclusively.
A semiconductor industry source said, "If you build a production line with funds from a specific customer, even if that customer's demand falls during a future downturn, you face the risk of having to allocate volumes first or supply below market prices," and noted, "Inside SK hynix, there is a cautious and negative view of the side effects that could arise from attracting big tech investment."
SK hynix currently holds a de facto duopolistic position in the high-bandwidth memory (HBM) market alongside Samsung Electronics. It supplies most of the HBM installed in Nvidia graphics processing units (GPUs), and this year's output is already sold out. Because there are virtually no companies other than SK hynix and Samsung Electronics that can properly mass-produce high-spec HBM for artificial intelligence (AI) data centers, a reversed dynamic has formed in which big tech clients have become the "Eul" in front of SK hynix.
Big tech corporations' proposals come in two main forms. First is directly shouldering part of the construction expense for the first-phase fab (Y1) of the semiconductor cluster SK hynix is building in Yongin, Gyeonggi Province. SK hynix plans to invest a total of 31 trillion won just in the first-phase fab construction, and once completed, wafer output will add 350,000 per month, expanding total capacity to around 900,000 per month.
In addition, a plan to support the expense of purchasing EUV lithography equipment from Netherlands-based ASML has been discussed. ASML's latest High-NA EUV tool is an ultra-high-priced machine costing about $400 million (about 550 billion won) per unit, roughly twice as expensive as current-generation EUV. To secure this equipment, which is essential for mass-producing advanced memory at 1c DRAM and beyond, SK hynix has already finalized plans to introduce EUV tools worth about 12 trillion won. Big tech corporations are seen as seeking to effectively preempt dedicated production lines by sharing part of this expense.
The backdrop for these unusual proposals is the extreme intensification of competition in AI infrastructure investment. Alphabet, Meta and MS each unveiled AI infrastructure investment plans worth tens of billions of dollars in recent earnings announcements. In particular, MS said this year's capital expenditures will reach $190 billion, explaining that the increase in component costs, including chips, alone amounts to $25 billion. Meta likewise acknowledged a strategy to secure the supply chain, saying it is "entering into contracts across the supply chain to secure necessary components in advance."
SK hynix is rejecting structural dependencies such as fab equity investment or joint ownership of equipment, while choosing to leverage big tech's urgency as negotiating leverage. A source familiar with SK hynix said, "As we sign long-term supply agreements (LTAs) with global big tech, a variety of ideas are being discussed to strengthen the binding force of the contracts." The industry interprets this as higher prepayments, ultra-long terms of more than five years, and price floor guarantee clauses. The strategy is to convert the funds brought by big tech into more favorable contract terms rather than plant equity.
SK hynix's confidence is backed by numbers. As of the first quarter this year, its operating margin reached 72%, and in Feb. it announced an additional $15 billion (about 21 trillion won) investment plan to expand next-generation memory production. Construction of the Yongin cluster's first-phase fab is underway with the goal of starting the first cleanroom in Feb. next year, three months ahead of the original schedule.