SK Hynix

Phase A — Understand the Business

Lens 1 · Company Overview

World's #2 memory maker by revenue and #1 in HBM — the stacked-DRAM that gates every AI accelerator. DRAM ~70–75% of revenue (incl. HBM, server DRAM, DDR5, LPDDR), NAND/eSSD ~20–25%, HBM the margin engine within DRAM. Memory crown jewel of SK Group (SK Square holds 20.07%; Chairman Chey Tae-won). Defining fact: sold out its entire 2026 output — DRAM, NAND, HBM — to customers including NVIDIA, tight into 2027, contracted a year-plus ahead with prepayments — a structural inversion of normal memory economics. NVIDIA is the anchor; primary HBM supplier since Hopper/Blackwell.

Lens 2 · Supply Chain

A double chokepoint — gated upstream by ASML/TSMC, itself the binding constraint downstream on NVIDIA. Upstream: ASML EUV (~$8B of tools committed by 2027); for HBM4 the logic base die moved off SK Hynix's DRAM process onto TSMC's logic node (a formal "One Team" alliance — HBM4 16-Hi uses a TSMC 12nm base die), coupling SK Hynix's roadmap to TSMC capacity + CoWoS. Downstream: NVIDIA → hyperscalers; HBM must match TSMC CoWoS interposer capacity, so the effective ceiling is the intersection of SK Hynix stacking yield and TSMC packaging. Chokepoint stack: HBM sev 9, CoWoS sev 9, EUV sev 7.

Lens 3 · Competitive Advantages

Lead is real; durability rests on yield and trust, not architecture. HBM share ~58–62%, Micron now #2 (~21%), Samsung third (~17%). NVIDIA Vera Rubin HBM4 allocation: SK Hynix ~60–70%, Samsung mid-20s%, Micron ~20%. The twist: Samsung passed NVIDIA's HBM4 qual and mass-produced first (Feb 2026) while SK Hynix was still optimizing to clear 11 Gb/s — yet SK Hynix kept the dominant allocation, because the moat is yield-at-volume + a multi-generation NVIDIA relationship (Samsung's HBM4 on 1c DRAM reportedly yielded ~50%), which is more durable than a process lead. Bargaining power: sold-out + prepaid + ~20% HBM3E price hikes. Vulnerability: a 2/3-vs-1/4 split, not a monopoly — Samsung's qual win is the wedge; allocation can shift at the margin.

Lens 4 · Segments

DRAM (incl. HBM) ~70–75% ↑; NAND/eSSD ~20–25% ↑ sharply (fully booked 2026); HBM within DRAM ↑↑ but not separately disclosed (n/a) — HBM3E 12-Hi 36GB ≈ ~2/3 of 2026 HBM shipments, HBM4 16-Hi 48GB ramps H2→Q4 2026. HQ Korea (Icheon/Cheongju); China NAND fabs (Wuxi/Dalian); new Yongin (KR) + planned Indiana (US) packaging.

Phase B — Measure Performance

Lens 5 · Earnings Result (Q1 2026, reported Apr 23 2026)

Record. Revenue ₩52.58T (~$35.5B) — first quarter ever above ₩50T, +60% QoQ, +198% YoY. Operating profit ₩37.61T, op margin ~72% (record); net ₩40.3T. Capex to rise "significantly" above 2025's ~₩30.2T — analysts model ~₩50T (+20–30%), prioritizing M15X, Yongin, ASML EUV. Stock reaction muted on the day; the violent move came in early June (Lens 8).

Lens 6 · Earnings Calls (sentiment trend)

Tone escalated from "tight" to "structurally short into 2027/2030." Threads: (1) "sold out" — DRAM+NAND+HBM booked through 2026, demand exceeding capacity for three years; (2) HBM4 + the TSMC One Team pivot, HBM4E mass production 2027, move into client-specific custom HBM; (3) heavy capex with a balance-sheet guardrail (goal: net cash >₩100T while raising returns) — "fund the ramp from the cash flush." CFO: memory has entered "a new paradigm."

Lens 7 · Comps

Lens 8 · Stock-Price Catalysts

High-beta memory-cycle + AI-narrative + Korea-macro instrument. All-time high ₩2,407,000 on Jun 2, 2026 (cap ~$100B → $1T in ~16 months). Jun 6, 2026: −9.92% (≈ −12% over five sessions) on a soft Broadcom outlook that spooked the AI-chip complex — note it fell ~10% on a Broadcom wobble, not even NVIDIA, showing how tightly coupled the equity is to one demand narrative. 2022–23 trough: swung to a widening operating loss, then re-rated violently on HBM/AI. Catalyst taxonomy: memory-pricing/contract data, NVIDIA HBM4 allocation headlines, Samsung/Micron qual news (share-shift fear), Korea macro.

Phase C — Judge People & Books

Lens 9 · Management & Governance

CEO Kwak Noh-jung; CFO Kim Woohyun/Kim Jae-joon (romanization varies — a hygiene note). Controlled via SK Square (20.07%) under the SK Group pyramid; Chairman Chey Tae-won drives strategy (at Computex 2026 pledged to double capacity in 5 years, citing shortage through 2030). Foreign ownership ~56%. The headline governance event: a confidential US (Nasdaq) listing, H2 2026, ~2–3% float, raising ~$14B, with the explicit stated rationale of forcing a re-rating by putting SK Hynix in direct comparison with Micron* — the trade thesis voiced by the company. Red flags / chaebol tells: investor groups oppose the dilutive new-share issuance (want buybacks); a ₩100T shareholder/employee reward "burden"; SK pyramid cross-shareholding governance discount.

Lens 10 · Forensic Red Flags

(1) Peak-cycle accounting — 72% op margin / 61% ROE are cycle-peak; memory mean-reverts violently (losses in 2023); forward P/E ~6–9× is the market saying it won't last; watch inventory build + contract-price roll-over (Q1 balance-sheet detail n/a — pull primary). (2) NVIDIA concentration — HBM ~2/3 to one buyer's roadmap; the Jun-6 −10% on a Broadcom wobble shows the coupling. (3) HBM not separately disclosed — the #1 value driver is modeled, not reported. (4) Capex vs durability — ~₩50T + ~$8B EUV + Indiana/Yongin underwritten by "sold out 3 years"; the net-cash guardrail mitigates, but a cycle turn mid-build is the canonical memory trap. (5) Chaebol/related-party — SK pyramid, the ₩100T reward, dilutive listing opposed by minorities.

Phase D — Project & Stress-Test

Lens 11 · Forward Projection (EPS, next 3 years)

Bottom-up; calendar-year; KRW. Q1'26 already ~₩40T net at ~77% net margin annualizes high — dispersion is the memory signature.

Lens 12 · Bull vs Bear

Bull. SK Hynix captures the single largest slice of the AI scarcity rent — ~62% of HBM, ~2/3 of NVIDIA's HBM4, sold out and prepaid into 2027, at 72% operating margin and ~61% ROE — and the market still values it as a Korean memory-cyclical at ~6–9× forward. Management is so convinced of the mispricing it is taking the company to Nasdaq specifically to force the re-rating. That is a rare alignment: the best fundamentals in the cluster and the most explicit, dated re-rating catalyst. Bear. (1) The lead is yield-and-trust, not a monopoly — Samsung out-qualified it on HBM4 timing and got ~1/4; if Samsung's yields converge, NVIDIA wants a credible second source and allocation shifts. (2) ~2/3 of HBM rides one customer's roadmap. (3) It's a memory cyclical at peak margins, with a chaebol governance discount the US listing may not erase. Pre-mortem (2027): Samsung's HBM4 yields hit parity, NVIDIA rebalances Rubin/Feynman allocation toward two credible suppliers, and a capex pause coincides with HBM4 capacity from all three landing — SK Hynix's margins fall from 72% to 40%, and the US listing prices at the old cyclical multiple anyway. Contrarian view: the market is fighting the last memory war (assuming mean-reversion) while the contract structure + the One-Team TSMC coupling have made SK Hynix more like a contracted infrastructure supplier than a spot-price cyclical — but unlike consensus, the variant view here is also that the US listing is the catalyst that forces the multiple to admit it.

Lens 13 · Devil's Advocate

The 2/3 allocation is not a moat — it's a procurement decision NVIDIA re-makes every generation, and Samsung already passed the qual. A −10% day on a Broadcom outlook proves the equity is a leveraged bet on one customer's capex, dressed as an oligopoly. The chaebol will steer capital to group priorities; the dilutive US listing (opposed by minorities) and the ₩100T reward "burden" both transfer value away from the shares. 72% operating margin is the most mean-reverting number in hardware. If AI capex disappoints 20–30% while HBM4 capacity floods in 2027, op margin halves and the "structural" story reverts to "Korean cyclical at the top of the cycle" — exactly what the 6–9× forward multiple always said.

Lens 14 · Management Questions

1. What is HBM as a clean % of revenue — and will the US listing force that disclosure? 2. If Samsung's HBM4 yields reach parity, what protects your ~2/3 NVIDIA allocation? 3. Is the US-listing capital raised via new shares (dilutive) or secondary — and why oppose buybacks? 4. What's NVIDIA as % of HBM revenue? 5. How does the TSMC One-Team coupling affect your margin capture vs doing the base die in-house? 6. At what HBM ASP does ~₩50T capex become oversupply risk? 7. Net-cash ≥₩100T vs capacity ramp — which gives if they conflict? 8. Custom-HBM: how much pricing premium, and does it deepen single-customer lock-in? 9. Korea/China NAND fab export-control exposure? 10. What trough margin would you defend in a downturn?