Long-term supply agreements locked in with 14 clients; over 50% of 2027–2028 production capacity already secured.
DRAM and HBM effectively sold out through 2029; total shareholder returns targeted at approximately 100 trillion won.
SK hynix announced that its production of DRAM and high-bandwidth memory (HBM) is effectively fully booked through 2029. Driven by an explosive increase in AI data center investment, global big-tech firms are proactively securing memory supplies years in advance. In the third quarter, the company’s operating profit exceeded 83 trillion won, with an operating margin nearing 80%.
During its third-quarter earnings call on the 28th, SK hynix stated that based on existing long-term supply agreements and ongoing negotiations with key clients, its DRAM and HBM production is essentially sold out through 2029.
While not every contract is finalized with set pricing, the company has aggregated concrete purchasing plans from its clients and views the ongoing negotiations as highly likely to translate into definitive deals.
The company has already secured long-term supply agreements with 14 major clients, including global cloud service providers (CSPs). These contracts account for over 50% of the company's total production capacity for 2027 and 2028, ensuring a committed buyer base for a significant portion of its output over the next two years.
The Race for Memory: Long-term Contracts and Fluid Pricing
The competition among global tech giants to secure memory is now extending into direct capital investment for production facilities.
As previously reported by Reuters, major clients have proposed supporting SK hynix’s production line investments or subsidizing the cost of high-end manufacturing equipment. These moves are designed to ensure a stable supply of memory required for data center expansion.
SK hynix has incorporated clauses into its long-term contracts that guarantee actual purchases. While deposits are being used to enhance contract reliability, supply prices are structured to reflect market conditions within agreed-upon ranges.
In an environment of rising memory prices, long-term contracts do not necessarily entail fixed, lower pricing. For SK hynix, the value proposition lies as much in pricing power as it does in volume.
The company expects memory supply shortages to persist until 2030, as AI investment broadens from big-tech firms to encompass mainstream corporations and national-level infrastructure. Given the technical complexity of advanced nodes and the long lead times required to build new fabs, increasing production capacity in the short term remains a significant challenge.
Operating Profit Surpasses 83 Trillion Won; HBM4 Supercycle Commences
The combination of rising memory prices and a shift toward high-value products has led to a dramatic improvement in profitability. Third-quarter consolidated revenue reached 104.62 trillion won, with an operating profit of 83.33 trillion won—increases of 327.9% and 632.1% year-over-year, respectively. The operating margin reached 79.7%.
These results outperformed market expectations. According to LSEG data cited by Reuters, the consensus estimate for operating profit was 76.7 trillion won, meaning the actual figure exceeded forecasts by approximately 8.6%.
While semiconductors require massive initial capital expenditure, the industry’s high operating leverage ensures that as production scales and product prices rise, a significant portion of additional revenue flows directly to the bottom line. Sales growth in high-value products, such as server-grade DDR5 and HBM, has been a key driver of this profitability.
Despite the surge in operating profit, net income declined by approximately 58% compared to the previous quarter to 39.78 trillion won, primarily due to the impact of significant one-time gains related to Kioxia investments recorded in the prior quarter.
In terms of product mix, shipments of the 6th generation HBM (HBM4) are ramping up, while sales of 321-layer TLC-based enterprise SSDs are rising within the NAND segment. SK hynix expects that by the fourth quarter, HBM4 shipments and revenue will surpass those of its current flagship product, HBM3E.
The company plans to expand its M15X facility in Cheongju by year-end and increase capital expenditure next year to coincide with the launch of the Yongin Semiconductor Cluster.
Record profits are also being channeled toward shareholders. SK hynix plans to return approximately 100 trillion won to shareholders by the 2026 fiscal year, including cash dividends exceeding 30 trillion won and share buybacks and cancellations totaling over 60 trillion won. A 40-trillion-won share buyback program announced in August was completed last week.
The board of directors approved a third-quarter cash dividend of 14 trillion won and an additional 20-trillion-won share buyback. Of the new buyback amount, 10 trillion won will be retired, while the remaining 10 trillion won will be utilized for employee compensation. As of the end of the third quarter, the company held a net cash position of 98.7 trillion won.
With demand visibility stretching to 2029, SK hynix is now focused on the expansion of its Cheongju and Yongin facilities. The duration of this semiconductor boom will depend not only on the order backlog already in place but also on the pricing power the company can maintain as it scales its production capacity.
[SOURCE] Title: SK Hynix, 3 years later, even memory is lined up... Operating profit margin approaching 80%
