SK Hynix unveils $75 billion shareholder return plan after posting record profit

SEOUL: South Korean chipmaker SK Hynix said on Wednesday it would return about $75 billion to shareholders this year, after reporting a more than seven-fold jump in quarterly profit as AI infrastructure demand continues to drive up memory chip prices.

The Nvidia supplier also said it has sold out of HBM and DRAM chips until 2029, that HBM demand was double what it can supply, and that a chip shortage is likely to continue through 2030 — comments that contrast with market jitters about AI demand momentum and the durability of AI investment.

Addressing concern about a potential slowdown in customers’ AI spending, Chief Financial Officer Kim Woo-hyun said customers were looking closer at project feasibility and profitability while refining the timing of investment.

“We expect AI investment momentum to continue, as customers’ AI spending is translating into broader adoption of AI services and tangible business results, while the range of companies investing in AI is also becoming more diversified,” Kim said.

SK Hynix shares rallied as much as 9.4% in morning trade.

The chipmaker said its shareholder return policy for this year will total about 100 trillion won ($75 billion), comprising cash dividends of more than 30 trillion won and share repurchases and cancellations of more than 60 trillion won, including 40 trillion won announced in August.

It also said it will return most of the gain earned from its investment in Japanese peer Kioxia to shareholders through a special dividend to be distributed as part of its third-quarter and full-year payouts.

Locking in customers

SK Hynix is the global leader in HBM chips — high-bandwidth memory chips used in AI processors — accounting for almost half of the market, showed data from Nomura.

It is also a leading supplier of dynamic random access memory chips, or DRAM.

To improve the estimation of mid-to-long-term demand, SK Hynix said it has signed long-term agreements with 14 major customers, while “proactively discussing with a number of customers the possibility of extending the contract terms, which are typically five years.”

“The LTA volume secured to date corresponds to more than 50% of total production capacity for 2027 and 2028,” it said.

To meet demand, SK Hynix said it will increase capital expenditure significantly next year from this year, to invest in equipment for advanced chipmaking processes as well as infrastructure in South Korea and overseas.  

Record quarterly profit

SK Hynix reported operating profit of 83.3 trillion won for July-September, a quarterly record, versus 11.4 trillion won in the same period a year earlier.

That compared with the 76.7 trillion won LSEG SmartEstimate, which is weighted toward estimates from analysts who are more consistently accurate. Revenue rose 328% to 104.6 trillion won.

“The results have eased many of the market’s concerns, with earnings coming in ahead of expectations,” said senior analyst Ryu Young-ho at NH Investment & Securities.

“Given that the fourth quarter is traditionally stronger, operating profit could approach 100 trillion won,” Ryu said. SK Hynix’s message about sustained medium-to-long-term memory demand was clear and has likely reassured investors, he said.