SK Hynix will invest 10 trillion Korean won in infrastructure investment

SK Hynix will allocate about 10 trillion won for facility investment next year, an increase of about 50 percent compared with this year. The move is a proactive response to the "semiconductor winter" and aims to maintain its leadership in the advanced semiconductor market, including high bandwidth memory (HBM).

　SK Hynix has decided to allocate about 10 trillion won for capital expenditures (CAPEX) in 2024, according to a source in the electronics industry on November 9th. This is an increase of about 3 trillion to 4 trillion won 6 trillion to 7 trillion won over this year's projected investment in facilities.

　The program focuses on investing in expanding facilities to meet the growing demand in the era of artificial intelligence (AI). We will focus on expanding HBM-related facilities and increasing investment in silicon through-hole (TSV) technology, a key component of HBM production. In addition, funds will be utilized for production facilities for high value-added DRAMs such as DDR5 and LPDDR5. On the other hand, it was revealed that investments in the NAND flash memory field, which is still expected to face a deficit until the first half of next year, will be capitalized.

　SK Hynix plans to invest 10 trillion won (7.62 billion U.S. dollars) in facilities next year, exceeding market expectations. The securities industry initially predicted that "SK Hynix's investment next year will be similar to this year's, at around 6 trillion to 7 trillion won". In view of the economic challenges, observers expect strict management measures to continue into next year. SK Hynix expects a deficit of more than 8 trillion won this year due to a sharp drop in storage semiconductor prices.

　However, in the face of scarcity of semiconductor HBM products, SK Hynix has decided to invest significantly more next year than this year.HBM has shown signs of being completely sold out, not only for next year's production, but also for the expected production in 2025.

　In order to expand HBM production capacity, SK Hynix is significantly increasing its investment in TSV technology, a technology used in HBM production that involves the creation of holes to vertically connect stacked DRAMs. semiconductor facilities are also expanding, with a focus on advanced DRAMs such as 10nm 4th (1a) and 5th (1b) generation.

　SK Hynix believes it can easily handle this investment with its internal cash resources. As of the end of September, the company's cash and cash equivalents stood at 8.53 trillion won ($6.5 billion.) The debt ratio at the end of September was at a moderate level of 84.8 percent. In addition, there is room for further borrowing if needed.

　Cash flow performance also showed improvement. Despite an operating loss in the third quarter of the year, SK Hynix reported EBITDA of KRW1.54 trillion ($1.17 billion) for the same period. EBITDA is an indicator of actual cash flow, excluding depreciation expense, and is accounted for on paper only.

　SK Hynix is expected to turn a profit next year as DRAM prices rebound. According to market research firm TrendForce, the DRAM fixed contract price rose 15.4 percent to $1.50 in October from a year earlier. This marks the first time DRAM prices have been on an upward trend in two years and three months since July 2021.The consensus estimate for SK Hynix's operating profit next year is 8.44 trillion won.

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