KB News Desk
SK hynix is facing a dilemma in balancing production between advanced high-bandwidth memory (HBM) chips and existing legacy DRAM products, as its focus on HBM is adversely impacting its stock value.
SK hynix’s share price fell from 230,000 won on July 15 to 191,800 won on Friday, suffering a 16.6 percent drop in just two weeks. Notably, the stock price dropped 8.87 percent on Thursday, despite the company reporting record quarterly sales of 16.42 trillion won ($11.88 billion) and 5.47 trillion won in operating profit.
It recovered slightly on Monday, closing at 195,600 won, up 1.98 percent from a session earlier, but failed to defy the recent downtrend.
A number of domestic brokerages have already lowered their price targets on SK hynix, as NH Investment & Securities adjusted its price target from 300,000 won to 280,000 won and Hi Investment & Securities made a drastic cut from 268,000 won to 217,000 won.
Industry officials and analysts attribute the skeptical valuation to the company’s balance between HBM and other legacy DRAM products.
HBM vertically stacks DRAM chips to save space and power, and is viewed as a key component in graphics processing units for powering generative artificial intelligence.
SK hynix has been maintaining its leadership in HBM, serving as the main supplier for Nvidia’s processors, while its main rival Samsung Electronics has yet to supply HBM chips to Nvidia.
As HBM chips are viewed as the next main revenue source for chipmakers, SK hynix has been concentrating its wafer capacity for HBM chips rapidly to ramp up its output.
However, this has caused an imbalance between HBM and legacy DRAM products, triggering a supply shortage of legacy DRAM products and pushing up their prices.
Morgan Stanley said in its June report that the supply shortage for the entire DRAM market will exceed that of HBM next year, adding “the lack of investment in this area (legacy DRAM) is occurring as the memory supply chain rapidly transitions to HBM.”
Due to this, SK hynix also said in its second-quarter conference call, Thursday, that it is “hard to rule out the possibility of legacy DRAM’s profitability outperforming that of HBM.”
