SK Hynix Buried Under Customer Cash Offers to Expand Memory Output, but Insider Warns Available Capacity Is ‘Essentially Zero’

SK Hynix is being crushed by massive memory demand, but investors are offering assistance to increase its production capacity.

SK Hynix Memory Demand Swells, but It Is Wary of Investments Towards Its Production Capacity

While Agentic AI shifts gears from GPUs to CPUs, the DRAM demand continues to remain high as both components require memory. SK Hynix, being one of the leading DRAM makers, is already facing severe production constraints. At the same time, SK Hynix is being approached by tech firms to invest in its chip production capabilities.

As per Reuters, it is reported that tech firms, mainly in the AI segment, are aiming at SK Hynix with brand new investments targeting the expansion of its production lines and acquisition of expensive equipment such as ASML's EUV machinery, which plays a vital role in DRAM production.

The firm's customers have been proposing a range of offers to the South Korean chipmaker, including investing in dedicated memory production lines, six people said.

But the chipmaker, flush with cash, is cautious about taking financial commitments ​from customers, as such deals could hold it hostage to specific buyers and require it to supply chips at lower prices in exchange for ⁠securing longer-term and more stable revenue guarantees, two people said.

Reuters

The company has already integrated High-NA EUV technologies for the production of next-gen DRAM, surpassing Samsung & Micron. Even TSMC has said that they will sidestep next-gen EUV machines for now, and focus on more viable & cost-effective solutions that provide better yields in their chip manufacturing business.

Despite the investment opportunities, SK Hynix is being extra cautious before landing a deal with any particular firm. Reuters sources state that SK Hynix doesn't want to be involved in vendor-locking certain capacity or lowering the costs of its chips to secure a long-term revenue source.

"Regardless of the type of offer, available capacity is essentially zero right now," one of the sources said. "There isn't even a small portion that ​can be designated for a specific customer."

Reuters

As of right now, SK Hynix produces zero additional capacity than what they are already making. So no one is getting special treatment, as the current supply chain crisis has changed the equation of the industry. It should be stated that DRAM makers have already warned that memory shortages will last many years, with Samsung previously stating that 2027 will be far worse than 2026 for DRAM/NAND markets.

"Due to current supply constraints, there are limitations in accommodating all customer requests," SK Hynix said at the time, adding that customer requests for longer-term contracts to secure volume were rising sharply.

Reuters

Currently, SK Hynix is addressing the rising AI demand by building its new P&T7 Mega-Fab, which will be the size of 32 soccer fields. This facility will be dedicated to next-gen HBM production and will be ready by 2028. At the same time, SK Hynix is also expanding its existing production lines, in addition to what is being proposed by investors.

However, in all of this, we should remember the fact that the facilities that are being built currently are designed to meet the requirements of the next 2-3 years.

DRAM makers are only able to meet 60-70% of this year's demand, & it is expected to swell in the coming years with the addition of new multi-Gigawatt data centers, so everything seems to suggest that memory production will remain tight for many years to come. Hopefully, next-gen technologies such as Intel's ZAM might be able to address the shortcomings of today's memory standards with a more viable, cost-effective, and easy-to-produce standard.

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