After Earning Major Profits From HBM, SK Hynix Now Plans To Prioritize DDR5 “General-Purpose DRAM” Production

SK Hynix is planning to return to general-purpose DRAM, such as DDR5, after securing record revenue from HBM memory.

SK Hynix Reportedly Finds No Reason To Accelerate Its HBM Production, Will Instead Focus on DDR5 Memory As Shortages Get Severe In The General-Purpose DRAM Segment

HBM has been the main driver for the big three DRAM manufacturers for the last couple of months due to increased demand from AI firms. This has led to record profits for Samsung, Micron, and SK Hynix. At the same time, these companies stopped focusing production on general-purpose DRAM solutions such as DDR5. But now that each of these companies has established a strong foothold in the HBM segment, they are now planning to go back to the general-purpose DRAM segment.

As per a report by Chosun Biz, it is reported that HBM now accounts to 40% of SK Hynix's total revenue. This has led them to adjust the expansion of their 6th Generation High-Bandwidth Memory (HBM4). Now HBM4 is going to be a key product for AI chips, with Hynix being the main supplier for NVIDIA's Rubin platform.

The company is adjusting its resource allocation to secure additional profits in the general-purpose DRAM market, where supply shortages are severe, rather than engaging in excessive competition for capacity expansion.

via Chosun Biz

However, this time, SK Hynix is said to be delaying the conversion of its HBM3E lines to HBM4 as the industry sees no need to rush the transition to HBM4 and HBM4E products yet. This is based on the current market revenues that these companies share, and they are well-equipped to meet HBM's demand for Rubin.

Meanwhile, SK Hynix's main competitor, Samsung, is raking in big profits from the general-purpose DRAM segment, and SK Hynix wants its own slice of this cake. Hence, we will see memory manufacturers shift from HBM to General-Purpose DRAM, which includes DDR5 and LPDDR5X memory.

According to industry sources on the 23rd, SK Hynix is ​​reportedly delaying the conversion of some 5th-generation HBM (HBM3E) production lines, which were originally scheduled to transition to HBM4. The company plans to secure additional profits by increasing its responsiveness to the general-purpose DRAM market, which currently records higher operating profit margins than HBM. The industry view is that this decision is based on the judgment that there is no need to rush the transition to HBM4 and HBM4E (7th-generation HBM), given that the company has already secured a solid position in the HBM market.

via Chosun Biz

The General-Purpose DRAM segment has already been facing severe shortages, far worse than the HBM segment. This only happened because the same companies decided to shift focus to HBM and AI-focused memory solutions. Now that they have hit a peak, they want to return to GP-DRAM. This won't mean that DDR5 prices will get any better, but it will lead to slightly better RAM availability in the OEM/ODM markets and server markets.

SK Hynix has previously reported that the ASP of DRAM has risen beyond 60%, and the recent Microsoft DDR5 supply contract also reflects a long-term focus towards General-Purpose DRAM solutions. Even if SK Hynix moved to General-Purpose DRAM, they will still be able to retain a strong share in the HBM segments. The profit margins of general-purpose DRAM are estimated to reach 2x by the end of this year.

We don't expect a major change in the markets with this renewed DDR5 DRAM production. It might cause a short-term effect, but once HBM demand picks up again, we will see the same vendors set their eyes on the more lucrative DRAM industry. These DRAM vendors have created a loop that benefits only themselves, moving production where they can earn big profits.

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