By Heekyong Yang and Hyunjoo Jin
SEOUL, Oct 28 (Reuters) - South Korea's SK Hynix will return about $75 billion to shareholders this year, it said on Wednesday, after reporting a more than seven-fold jump in quarterly profit, boosted by the impact of AI infrastructure demand on 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 investor concerns about AI demand momentum and the durability of AI investment.
Its upbeat outlook helped to drive gains across Asian tech stocks. SK Hynix shares rallied 11% and larger rival Samsung Electronics gained 9%.
Addressing the possibility of a slowdown in customers' AI spending, Chief Financial Officer Kim Woo-hyun said investors were looking more closely at project feasibility and profitability but that spending would continue.
"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.
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.
Its commitment to buy back and cancel shares would be an effective way to boost per-share value, Ryu Young-ho, senior analyst at NH Investment & Securities, said.
SK Hynix shares have more than doubled this year in an AI-driven chip rally, but have halved from a record high hit in June.
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, data from Nomura showed. It is also a leading supplier of dynamic random access memory chips, or DRAM.
But longer-term competitive pressure is growing. Chinese memory chipmaker CXMT plans to begin producing HBM3E chips over the next two months, despite as little as 20% of the chips it makes being usable, Reuters reported on Wednesday.
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 to 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 Ryu.
"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.
($1 = 1,326.0900 won)
(Reporting by Heekyong Yang, Joyce Lee and Hyunjoo Jin; Editing by Christopher Cushing, Miyoung Kim and Barbara Lewis)
