SK hynix is putting more weight on targeting the commodity DRAM market while adjusting the pace of expanding mass production of sixth-generation high-bandwidth memory (HBM4). With HBM already accounting for more than 40% of revenue and securing an overwhelming lead, the company said it is reallocating resources to secure additional revenue from commodity DRAM, where the supply shortage is severe, rather than engaging in an excessive capacity expansion race.
According to the industry on the 23rd, SK hynix is said to be slightly delaying the conversion of some fifth-generation HBM (HBM3E) production lines that were initially scheduled to shift to HBM4. The company plans to secure additional revenue by boosting responsiveness in the commodity DRAM market, which is currently posting a higher operating margin than HBM. The industry view is that, since it already has a solid foothold in the HBM market, there is no need to rush into converting to HBM4 and HBM4E (seventh-generation HBM).
Behind this strategic pivot is a reversal in profitability between commodity DRAM and HBM. As of the first quarter this year, the price per gigabit (Gb) of commodity DRAM still falls short of HBM, but the operating margin gap is estimated to have already widened by more than 15 percentage points (P). Daishin Securities projected that the operating margin for commodity DRAM could rise to the theoretical peak of 90% within the year.
A source familiar with SK hynix said, "From the standpoint of SK hynix management, it is impossible not to be mindful that a rival, Samsung Electronics, is already earning massive revenue from commodity DRAM rather than HBM." The source noted, "SK hynix's HBM4 is still undergoing Nvidia's quality certification process, and forecasts for the production volume of Nvidia's next-generation chip 'Rubin,' which will adopt HBM4, are trending downward, so there is no reason to speed up the HBM transition."
Overseas investment banks (IBs) also back this trend. Goldman Sachs assessed that it is sufficient for SK hynix to maintain a dominant share of over 50% in HBM3 (fourth-generation HBM) and HBM3E (fifth-generation HBM) at least through 2026. Morgan Stanley identified the key driver of SK hynix's value as the overall memory price cycle rather than defending HBM share, and raised its earnings forecasts by 56% to 63% based on an outlook that the average selling price of DRAM will rise 62% in 2026.
In fact, in its first-quarter results announcement this year, SK hynix said the average selling price (ASP) of DRAM rose by the mid-60% range, and it presented a plan to focus on meeting demand for high-density server modules and mobile products. The three-year DDR5 supply contract signed with Microsoft (MS) is also seen as a move to secure long-term earnings visibility in commodity DRAM.
Meanwhile, as SK hynix moves to adjust HBM4 volumes, the likelihood of rival Samsung Electronics increasing its market share is growing. According to Counterpoint Research, SK hynix's HBM market share was 57% in the fourth quarter last year, but there is talk it could gradually shrink, and some expect that if Samsung Electronics succeeds in mass-producing HBM4 in the second half of this year, SK hynix's share could fall to the 50%–60% range.