SK hynix shifts to commodity DRAM as margins top HBM, opening Samsung HBM chance

SK hynix is putting more weight on targeting the commodity DRAM market while adjusting the pace of expanding mass production of 6th-generation high bandwidth memory (HBM4). With HBM already accounting for more than 40% of revenue and establishing an overwhelming lead, the company says it is reallocating resources to secure additional revenue from commodity DRAM, where the supply shortage is severe, rather than engaging in excessive capacity expansion races.

According to the industry on the 23rd, SK hynix is said to be slightly delaying the conversion of some 5th-generation HBM (HBM3E) production lines that were originally set to transition to HBM4. The policy is to boost responsiveness in the commodity DRAM market, which is currently recording a higher operating margin than HBM, to secure additional revenue. The industry views this as reflecting the judgment that there is no need to rush the transition to HBM4 and HBM4E (7th-generation HBM), given SK hynix has already secured a solid foothold in the HBM market.

Behind this strategic shift lies a profitability reversal between commodity DRAM and HBM. As of the first quarter of 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 of commodity DRAM could climb to its theoretical peak of 90% within the year.

A person familiar with SK hynix said, "From SK hynix management's perspective, it is impossible to ignore that the competitor, Samsung Electronics, is already earning massive revenue from commodity DRAM rather than HBM." This person noted, "Because the production outlook for Nvidia's next-generation chip 'Rubin,' which will be equipped with HBM4, is trending downward, there is no reason to speed up the HBM transition."

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. Its three-year DDR5 supply contract with Microsoft (MS) is also interpreted as a move to secure long-term earnings visibility in commodity DRAM.

On the other hand, as SK hynix moves to adjust HBM4 volumes, the possibility of a market share increase for rival Samsung Electronics is growing. According to Counterpoint Research, SK hynix's HBM market share was 57% in the fourth quarter of 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.