South Korean semiconductor manufacturer SK hynix reported an extraordinary 158% year-over-year surge in operating profit to $5.2 billion for Q1 2025, driven by soaring demand for AI memory chips. The company’s remarkable performance, however, comes with cautionary notes about potential market volatility and tariff impacts in the latter half of the year.

The semiconductor giant achieved its second-best quarterly results in history, with revenue climbing 42% to $12.3 billion and net profit reaching $8.1 billion. Operating margins expanded significantly to 42%, marking eight consecutive quarters of profitability growth, primarily fuelled by unprecedented demand for high-bandwidth memory (HBM) and DDR5 modules.

At the heart of SK hynix’s success lies its 12-layer HBM3E technology, which now represents more than half of the company’s HBM3E sales. The firm has also begun sampling HBM4 12Hi, positioning itself as the first manufacturer to develop next-generation AI memory, with mass production scheduled for late 2025.

“Memory market growth accelerated faster than projected due to AI system development races and inventory buildup,” the company stated in its earnings release, highlighting the robust demand driving its performance.

Despite the strong financial results, SK hynix faces potential headwinds from a proposed 25% U.S. semiconductor tariff. While the company maintains that its current HBM contracts are protected, executives acknowledge that such trade measures could impact global AI investments and HBM demand in the longer term.

The company’s technological leadership remains evident through its strategic initiatives, including the ongoing HBM4 development programme and expansion of the CXL ecosystem with 128GB DDR5 modules. SK hynix has confirmed its ambitious target to more than double HBM revenue in 2025 compared to the previous year.

Market analysts present divided opinions on SK hynix’s outlook. While some emphasise the company’s dominant position in AI memory manufacturing, supplying 80% of Nvidia’s HBM3E requirements, others express concerns about geopolitical risks and trade tensions.

Looking ahead, SK hynix is implementing a profit-centred growth strategy, focusing on the transition from HBM3E 8Hi to 12Hi technology in Q2 and launching new products for AI PCs and servers. The company is also working to reduce its debt ratio to 29%, creating additional capacity for research and development investment.

News Source: CNBC