Markets
SK Hynix Earned 83 Trillion Won at an 80% Margin
Korea's SK Hynix reported record third-quarter operating profit of 83.3 trillion won on Wednesday, about $62.8 billion, at a 79.7% margin, beating forecasts by almost 10%. It paid a 20,000-won dividend, including its first special payout, and said its memory is sold out through 2029.
A memory chipmaker now earns margins that used to belong to software companies. SK Hynix said on Wednesday, October 28, that third-quarter revenue rose to 104.6 trillion won, the first quarter above 100 trillion and up 328% from a year earlier, and that operating profit reached 83.33 trillion won, about $62.8 billion, up 632%. The operating margin was 79.7%, against 76.3% in the second quarter. FnGuide's consensus had been 96.7 trillion won of revenue and 76.0 trillion of operating profit, so the company beat by 8.2% and 9.7%.
The reason is high-bandwidth memory, the stacked DRAM that sits next to AI processors. SK Hynix said HBM and its other DRAM products are sold out through 2029, that long-term agreements already cover more than half of its 2027 and 2028 capacity, and that it expects supply to stay below demand through 2030, The Korea Times reported. HBM4, the newest generation, is expected to overtake HBM3E in both shipments and revenue in the fourth quarter. "Even when one group of investors scales back its demand, others are increasing theirs," the company said, answering the question that has hung over the stock since the summer: what happens if one big buyer slows its spending.
That question explains why the shares had fallen 18.8% between September 1 and Tuesday, from 1,693,000 won to 1,374,000 won, even as profit forecasts rose. The company's answer was cash. It declared a third-quarter dividend of 20,000 won a share, half of it a special dividend from gains on its stake in Japan's Kioxia, and approved a new 20 trillion won buyback, of which 10 trillion won will be used to repurchase and cancel shares and the rest for employee compensation. Its return plan for 2026 now totals about 100 trillion won, including at least 30 trillion in cash dividends. "We believe our shares are undervalued," it said.
The market agreed, at least for a morning. The shares were up 7.68% by 10:30 a.m. in Seoul on Wednesday, their fourth straight gain, after the Kospi had risen 3.09% on Tuesday on Korea's stronger-than-expected third-quarter GDP. In New York the night before, the Philadelphia semiconductor index rose 3.6% with every member higher, and Broadcom gained 4.0% after it emerged that Bank of America, Citi, Morgan Stanley and Blackstone had arranged $63 billion to buy its AI accelerators and lease them to Anthropic.
Samsung Electronics reports on Thursday and Microsoft and Alphabet on Wednesday evening, after the Fed. Their capital-spending plans are the demand side of SK Hynix's numbers. A company that says it is sold out for three years is, in effect, saying its customers have already committed the money; the risk the market keeps pricing is not this quarter's profit but whether those commitments survive the financing strain now visible at the biggest buyers.