# SK Hynix Profit Misses Investors Lofty AI Expectations

An episode of [Bloomberg Daybreak: Asia Edition](https://invisiblenetwork.ai/podcast/1663863437), 29 Jul 2026, 22 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/58e85be7-dbb5-4043-afed-af80014dc0b3/2ecce6d9-a246-4e17-ab0a-b496003700ba/audio.mp3?utm_source=Podcast&in_playlist=27143354-63aa-4ac5-965d-af80014dc0d3

Business and finance news from the Asia-Pacific. SK Hynix Inc. earmarked at least $31 billion in capital spending this year after reporting a six-fold surge in quarterly profit, a record outlay that coincides with growing fears about overinvestment in AI capacity. SK Hynix said it expects its capital investments to rise around 50% to at least 45 trillion won ($31 billion). It posted margins of more than 80% for the June quarter — a high watermark — because of the endemic memory shortages that have helped raise prices it charges customers like Apple Inc. and Nintendo Co. Yet the Korean company's shares fell 11% in Seoul Wednesday, reflecting both the sky-high expectations that surround the AI industry's linchpins and the growing concerns that big tech firms such as Meta Platforms Inc. are building more data centers than they need. Korea's benchmark KOSPI fell for a second straight day. We speak to Winnie Hsu, Bloomberg's Asia Equities Reporter. And for more analysis on SK Hynix earnings, Bloomberg TV hosts Yvonne Man and David Ingles spoke to SK Kim, Senior Analyst at Daiwa Capital Market Korea. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
[0:10] Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. In
[0:13] Speaker 2: the US session, semiconductor stocks were down for a fourth
[0:16] Speaker 2: straight trading day. On Tuesday, we had the Philadelphia Semiconductor
[0:20] Speaker 2: Index dropping by four and a half percent. And if
[0:23] Speaker 2: you go back to June twenty second, when the socks
[0:27] Speaker 2: hit a record high, the index is down by more
[0:29] Speaker 2: than twenty four percent since then. And speaking of the
[0:32] Speaker 2: chip makers, this morning and Soul sk Heinex reported quarterly
[0:36] Speaker 2: operating profit rose a smaller than expected wait for it,
[0:40] Speaker 2: five hundred and fifty seven percent. Revenue, by the way,
[0:44] Speaker 2: also missed expectations for a closer luck, let's bring in
[0:47] Speaker 2: Bloomberg's when he Sue Winnie is one of our Asia
[0:49] Speaker 2: equities reporters. She joins from our studios in Hong Kong.
[0:53] Speaker 2: A lot to cover. Let's talk about the sk Heinex numbers.
[0:57] Speaker 2: I think the market initially was a little fused here
[1:00] Speaker 2: because these numbers did miss expectations. Yet right now in
[1:05] Speaker 2: Soul the stock is trading higher. What's your take here?
[1:08] Speaker 1: Yeah, so, well, first of all, the initial reaction, as
[1:12] Speaker 1: you just mentioned, five hundred fifty seven percent of a
[1:16] Speaker 1: quarterly profit jump, and we're still saying that this is
[1:19] Speaker 1: missing expectation by six percent. That means expectations really running high.
[1:24] Speaker 1: Now overall it is a bit of a miss. Seems
[1:28] Speaker 1: like investors are also focusing on the more polish side
[1:31] Speaker 1: of things, whether it includes s K high next saying
[1:35] Speaker 1: that they see prices really seeing a significant increase versus
[1:39] Speaker 1: the previous quarter. That was a positive takeaway, and investors
[1:44] Speaker 1: really like the fact that the company has finalized these
[1:48] Speaker 1: long term agreements with their key ten customers. So even
[1:53] Speaker 1: our Bloomberg Intelligence analysts were saying that they see this
[1:57] Speaker 1: growth to be more sustainable going forward from third quarter
[2:01] Speaker 1: because of these longer term contracts and that this will
[2:05] Speaker 1: likely going to be able to support the keep expending
[2:08] Speaker 1: that the company has been putting in. But also to
[2:12] Speaker 1: note that although we are seeing a bit of a rebound,
[2:15] Speaker 1: where we're coming from is really from a very low point.
[2:18] Speaker 1: Remember from the late June peak. The company has already
[2:22] Speaker 1: wiped off six hundred billion dollars in market cap. We're
[2:27] Speaker 1: seeing fifty percent of a drop from its June peak
[2:31] Speaker 1: as well, So from that point, we are seeing a
[2:34] Speaker 1: bit of a rebound not necessarily kind of being too
[2:38] Speaker 1: bullish or too bearish on the earnings itself as well.
[2:41] Speaker 2: So obviously this company is a major manufacturer of memory,
[2:45] Speaker 2: particularly the high bandwidth memory chips that are used in
[2:50] Speaker 2: AI applications, which takes us to the story this week
[2:53] Speaker 2: on the IPO of the Chinese memory chip maker CXMT.
[2:58] Speaker 2: That was quite a nice I think initially that stock
[3:02] Speaker 2: jump by more than four hundred and sixty percent is
[3:05] Speaker 2: there's still a lot of optimism now regarding CXMT, and
[3:10] Speaker 2: maybe the fact that even with other competitors like Samsung
[3:14] Speaker 2: and sk Heinez, that the market is still got this
[3:17] Speaker 2: robust demand from memory in a way that's not going
[3:20] Speaker 2: to harm any of cXt mpt's competitors. Am I wrong
[3:23] Speaker 2: about that?
[3:25] Speaker 1: Well, it does seem like most analysts expect demand to
[3:30] Speaker 1: be very strong going forward, at least through twenty twenty eight.
[3:33] Speaker 1: But the incoming competitor CXMT is definitely a very strong one.
[3:40] Speaker 1: We saw, as you mentioned, stocks popping more than five
[3:44] Speaker 1: hundred percent first day of debut, which in fact made
[3:47] Speaker 1: it the most valuable and the biggest company listed in
[3:53] Speaker 1: on shore China. So that is actually a big structural
[3:57] Speaker 1: change that we see for the Chinese market. It's symbolic
[4:00] Speaker 1: when you see that the onshore Chinese market has been
[4:04] Speaker 1: dominated by these financial names and now shifted towards tech.
[4:08] Speaker 1: So the debut of CXMT really marks that milestone of
[4:13] Speaker 1: China boosting that self sufficiency, self text sufficiency story. And
[4:18] Speaker 1: when it comes to competition, in fact, we are hearing
[4:21] Speaker 1: from analysts who have been rolling out these coverage of
[4:27] Speaker 1: the company expecting target price also quite high, and one
[4:32] Speaker 1: key reason is the expectation for them to take market
[4:36] Speaker 1: share away from the likes of Samsung, s ke Highnex
[4:39] Speaker 1: and even Micro So right now it is the fourth
[4:42] Speaker 1: biggest dram company in the world and with the market
[4:46] Speaker 1: share at about ten percent globally, but for example Nomuda
[4:51] Speaker 1: expecting them to take up to eighteen percent of that
[4:54] Speaker 1: global market share by twenty twenty eight. So you can
[4:57] Speaker 1: see that still lots of in enthusiasm in terms of
[5:02] Speaker 1: how this company can continue to ramp up. And with that,
[5:05] Speaker 1: we are also seeing further competition from these Chinese players
[5:11] Speaker 1: in other fields. We are looking at for example, just
[5:15] Speaker 1: yes to the day before, where we've learned that this
[5:20] Speaker 1: Shanghai based company is is mass producing these immersion deep
[5:27] Speaker 1: ultraviolet lithography machines, so the DUV machines and these machines
[5:32] Speaker 1: are critical for the AI chip making process. And now
[5:36] Speaker 1: it's taking on the likes of ASML, which has been
[5:41] Speaker 1: dominating the market with their so called more advanced extreme
[5:47] Speaker 1: ultraviolet so EUV products. But because the Chinese makers can
[5:50] Speaker 1: be mass producing this, they are able to actually be
[5:54] Speaker 1: able to pose a threat towards ASML. So these together
[5:58] Speaker 1: goes to show how potentially China's technology is improving and
[6:07] Speaker 1: advancing at a faster pace than what the rest of
[6:10] Speaker 1: market has been expecting.
[6:12] Speaker 2: I think that's an important point because as I recall,
[6:15] Speaker 2: the extreme ultraviolet tools from ASML, the EUV tools are
[6:21] Speaker 2: under export controls, so it's very tightly regulated, and if
[6:25] Speaker 2: you're a Chinese firm hoping to get this technology, you
[6:29] Speaker 2: simply can't have it, so that companies in China are
[6:32] Speaker 2: forced to innovate to try to find a workaround, which
[6:35] Speaker 2: takes us to the story on Moonshot and Kimmy K
[6:41] Speaker 2: three and I mentioned that because this is an open
[6:44] Speaker 2: weighted model, and today in the US we had Jensen Huang,
[6:49] Speaker 2: the CEO of Nvidia defending open weighted AI systems as
[6:53] Speaker 2: being a crucial part of developing the overall AI industry,
[6:58] Speaker 2: And I'm wondering, what are people say saying about kind
[7:01] Speaker 2: of open weighted models From the Chinese perspective, it seems
[7:05] Speaker 2: to me like this is a way to maybe create
[7:09] Speaker 2: a lot more competition on the price side. When you're
[7:12] Speaker 2: talking about a company like an open AI or an
[7:15] Speaker 2: anthropic that when a Chinese competitor enters the picture that
[7:21] Speaker 2: all of a sudden, you know your business may be
[7:23] Speaker 2: under threat. Yeah.
[7:26] Speaker 1: So for the Chinese makers, I guess the key point
[7:31] Speaker 1: is that they're cheap and because of just how their
[7:34] Speaker 1: model has been built, so it really is ramping up
[7:38] Speaker 1: kind of that price competition with their export so called
[7:42] Speaker 1: export token economy. So there's two steps right. Initially, investors
[7:46] Speaker 1: see this as a threat of them taking up the
[7:50] Speaker 1: market share of some of the other competitors, and that's
[7:52] Speaker 1: why we saw that when this was initially announced, it
[7:56] Speaker 1: provided this I guess, a shock to the rest of
[8:00] Speaker 1: the global AI chain and we saw shares fall right after,
[8:05] Speaker 1: but that actually soon came back just basically what we
[8:09] Speaker 1: saw with deep Seek as well, because investors now see
[8:12] Speaker 1: this more as an opportunity that if this kind of
[8:15] Speaker 1: cheap model can be utilized by more companies, that potentially
[8:20] Speaker 1: means that we can create further demand and then we
[8:23] Speaker 1: can do more with these models being more available. But
[8:28] Speaker 1: the tricky thing here is that if these US hyperskaters
[8:33] Speaker 1: start to use more of these cheaper models from China,
[8:37] Speaker 1: that can potentially mean that when they have a KPEX constraint,
[8:45] Speaker 1: they would actually prefer to use these more efficient Chinese
[8:49] Speaker 1: models then some of these US models. And when these
[8:54] Speaker 1: US models then don't have enough revenue, then that means
[8:58] Speaker 1: they might start to cut their case. And that's why
[9:01] Speaker 1: we potentially will see a negative effect because of these
[9:06] Speaker 1: Chinese competition as well.
[9:08] Speaker 2: Winnie, it's always a pleasure. Thank you so very much.
[9:11] Speaker 2: Bloomberg's Winnie Sue, who covers Asia equities for us from
[9:14] Speaker 2: our bureau in Hong Kong, joining us here on the
[9:17] Speaker 2: Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
[9:28] Speaker 2: I'm Doug Chrisner. Let's take a closer look now at
[9:31] Speaker 2: the earnings report from South Korea memory chip maker sk Heinez.
[9:35] Speaker 2: We caught up with senior analyst s K. Kim at
[9:38] Speaker 2: Die walk Capital Market, Korea. He spoke with Bloomberg TV
[9:41] Speaker 2: host David Englaise and ivonn Mann.
[9:44] Speaker 3: Ask, I know you just kind of tapped into this
[9:46] Speaker 3: earnings call that I had just wrapped up on SK.
[9:49] Speaker 3: What was the tone really from the c suite here
[9:52] Speaker 3: on what to look out for in the outlook?
[9:57] Speaker 4: Oh yeah, so s K heine, Uh, just on the
[10:01] Speaker 4: second quarter ownings. Actually the te con quoter owning. Uh,
[10:05] Speaker 4: they missed the consensus number, but actually it's not new. Uh,
[10:11] Speaker 4: it was it was referred in the market. Uh, but
[10:14] Speaker 4: it's mostly from the product mixed s K high needs
[10:17] Speaker 4: a higher exposure to HPM. So considering that there's the
[10:22] Speaker 4: demand for HPM three e uh un their second quarter,
[10:26] Speaker 4: that actually nlatively impact on the price increase. However, I
[10:32] Speaker 4: think that there's some disappointment is from the there's no
[10:36] Speaker 4: actually announcement on the additional shuld return. So I think
[10:40] Speaker 4: it masters anticipated some uh new editional shoulder a return planning,
[10:46] Speaker 4: especially for sure by back because of the writen correction
[10:49] Speaker 4: of the share price. Uh, it's pretty much overdone. However,
[10:55] Speaker 4: as as the CFO mentioned, uh that that they are
[10:59] Speaker 4: preparing some you know, shareholder return, but The thing is
[11:02] Speaker 4: that they just issued new ADA to share so that's
[11:06] Speaker 4: because of the due to them regulation, so they cannot
[11:10] Speaker 4: announce it some big announcement for the time being. So
[11:16] Speaker 4: I think it will be until you know, August, early August.
[11:20] Speaker 4: So that mean, uh, it's just some some delay. There's
[11:25] Speaker 4: no you know, it doesn't mean that they're not doing
[11:29] Speaker 4: you know, shareholder return. So maybe next quarter Salt quarter,
[11:35] Speaker 4: I think companies will announce it. Uh. I assume they
[11:39] Speaker 4: will announced the share buy back uh to invent the
[11:42] Speaker 4: you know, the stuff perfonmance and also actually their guidance
[11:47] Speaker 4: for salt quarter and the second half remain quite polish.
[11:52] Speaker 4: So considering some noise and concern in the market, especially
[11:57] Speaker 4: lit the land place, land Place can oversupply next year,
[12:01] Speaker 4: but the management maintain solid you know, and the demand
[12:06] Speaker 4: uh from data tenta driven the SSD UH, the different
[12:11] Speaker 4: type of the SSD. There's a lot of demand uh
[12:14] Speaker 4: that will continue until next year. So even the thought
[12:18] Speaker 4: quarter awnings, I think that we're mid the market estimate
[12:24] Speaker 4: and mostly the upcoming shore the return plan that should
[12:30] Speaker 4: be the catalyst for shure part.
[12:33] Speaker 5: Okay, why don't we Let's there are lots of facets
[12:37] Speaker 5: to talk about here. Let's let's zero in first on
[12:40] Speaker 5: the on the shareholder return and clearly to your point,
[12:42] Speaker 5: they couldn't give a lot of details because of uh
[12:46] Speaker 5: the current rules. What I think the CFO said I'm
[12:49] Speaker 5: slopping at some headlines is they are exploring options in
[12:52] Speaker 5: terms of returning the money. How much do you think
[12:57] Speaker 5: eskhis can afford to give back to share those in
[13:00] Speaker 5: the forms they have a buyback?
[13:05] Speaker 4: Yeah, I think they have a program basically returning fifty
[13:12] Speaker 4: percent pre cash flow. But the timing why the town
[13:18] Speaker 4: is until next year, as they announced the plan early
[13:21] Speaker 4: last year, so this is a three year tom so
[13:24] Speaker 4: they have actually one more year. But after also the
[13:30] Speaker 4: management guided for their target. It's you know, securing one
[13:37] Speaker 4: hundred trellion of net cash, you know, but the target
[13:41] Speaker 4: will be I think there will be a chiepover in
[13:44] Speaker 4: salt quarter, you know. So that means once they reached
[13:48] Speaker 4: that level, they were the more actively in a return
[13:54] Speaker 4: of the to the shoholders. So that's why we assume
[13:58] Speaker 4: that the soft quarter. You know, there is a timing.
[14:01] Speaker 4: I think their NETKESH as of now is about close
[14:05] Speaker 4: to sec seventy two on one, so maybe they will
[14:08] Speaker 4: leach their target level within the next quarter or sex
[14:13] Speaker 4: within the kind of half, so that will be some
[14:17] Speaker 4: positive catalyst and or so I think that one. One
[14:21] Speaker 4: other thing is that there's some more they didn't discuss much,
[14:25] Speaker 4: you know, details about the ATA. It looks a little
[14:29] Speaker 4: bit conservative, but it doesn't mean that they are conservative
[14:32] Speaker 4: in at a and then I think they will share
[14:36] Speaker 4: more details next time.
[14:40] Speaker 3: Ask why do you think we're seeing nine percent losses now?
[14:42] Speaker 4: I mean, I mean, the stock itself.
[14:44] Speaker 3: Has just been on a roller roller coaster, But what
[14:46] Speaker 3: do you think is driving I mean, it seems like
[14:48] Speaker 3: we're just extending those losses as you know, as we
[14:51] Speaker 3: were listening more into this earnings call.
[14:56] Speaker 4: Yeah, I think the key reason is the share share
[14:58] Speaker 4: of the return. So there's no clear guidance or the
[15:02] Speaker 4: you know, their plan.
[15:04] Speaker 3: Okay, there's also this sort of narrative that's emerging across
[15:10] Speaker 3: the chip space after of course, news of CXMT and
[15:13] Speaker 3: this blockbuster debut in China, of the Chinese competition that
[15:18] Speaker 3: could maybe somehow undercut you know, you know esk HIX
[15:23] Speaker 3: and it's market share, particularly in the d ram space.
[15:26] Speaker 3: I mean, what assumptions are you making on that front here,
[15:29] Speaker 3: and do you think those fears of Chinese competition are
[15:33] Speaker 3: they in some ways warranted?
[15:38] Speaker 4: Well, actually that I think that concern is a a
[15:43] Speaker 4: is overdone because you know, China market, China memory market
[15:48] Speaker 4: is also in big shortage, you know. And uh, you
[15:53] Speaker 4: know the global major memory maker city dam player, Actually
[15:58] Speaker 4: they are focusing on the US market because of now
[16:02] Speaker 4: the key demand is from the up US hyperscaler CSP
[16:06] Speaker 4: provider and some you know large consumer customers such as
[16:10] Speaker 4: the effor so you know, they actually they don't have
[16:15] Speaker 4: room to allocate their product to China, you know, anytime,
[16:20] Speaker 4: anytime soon, you know. And also the technology gap now
[16:25] Speaker 4: the ex empty they're just ramping up d d R five,
[16:30] Speaker 4: but their technology wide is a minimum to generation behind
[16:36] Speaker 4: of the major player and without EUV and there's a
[16:42] Speaker 4: very limited room for the or execution of the you know,
[16:49] Speaker 4: debandsion not technology. And also my view is that IP issue, Uh,
[16:55] Speaker 4: if Chinese maker tried to go outside China, I think
[16:59] Speaker 4: they would face some IP is just from the major
[17:03] Speaker 4: player because of the most of key dm IP is
[17:07] Speaker 4: occupied as a three player. So yeah, I don't think
[17:11] Speaker 4: that was some meaningful you know, a stress over next
[17:16] Speaker 4: two to three years.
[17:19] Speaker 5: Okay, let's let's get into that then. So clearly we're
[17:23] Speaker 5: in a shortage now. Clearly there's going to be a
[17:25] Speaker 5: shortage at the end of this year. Clearly most people
[17:28] Speaker 5: think that extends even going into the latter part of
[17:31] Speaker 5: twenty twenty twenty seven. But you know, looking at experience
[17:35] Speaker 5: and not just in chips, right, look at COVID. Everyone
[17:38] Speaker 5: thought when COVID started, we don't have enough masks, we
[17:40] Speaker 5: don't have enough vaccines. Look at when the war started,
[17:42] Speaker 5: we don't have enough oil. Look at you know we've
[17:44] Speaker 5: been okay, you know, the shortages tend to last shorter
[17:48] Speaker 5: than most people think at the start of the shortage.
[17:50] Speaker 5: That's my question to you is on a scale of
[17:52] Speaker 5: one to ten, where do you think we are in
[17:53] Speaker 5: this chip cycle on a scale of want with ten
[17:56] Speaker 5: being the end of that shortened cycle.
[18:00] Speaker 4: Yeah, I think that this is a kind of uh
[18:03] Speaker 4: where some structure changing demand. Right now, the you know,
[18:10] Speaker 4: the data center demand account for more than half of
[18:16] Speaker 4: the memory demand. So SOLbo dam account for fifty percent
[18:19] Speaker 4: of DM demand this year, and next year it will
[18:22] Speaker 4: be sixty percent. And also HPM HM. Yeah, this year's
[18:27] Speaker 4: HPM is letterly slow because of the price limited price increase.
[18:31] Speaker 4: But next year we expect a big jump in the
[18:33] Speaker 4: ASP because of the huge gap between commodity and the
[18:38] Speaker 4: HPM the margin. So in that case, next year, the
[18:42] Speaker 4: data center demand we cover more than seventy percent of
[18:45] Speaker 4: DM demands, you know. So this is a structure change
[18:50] Speaker 4: in the demand because of this data center customer. The
[18:55] Speaker 4: key big difference with the consumer conventional demand. The customer
[18:59] Speaker 4: is a there's no seasonality. Yeah, so the consumer product
[19:05] Speaker 4: always has diagonality, the weak versa you know, strong second
[19:09] Speaker 4: of they're reserting the bolletiality in the market and the
[19:13] Speaker 4: unbalanced in the inventory. But now this is a this
[19:17] Speaker 4: is infrastructure related demand, so AI infrastructure demand. I think
[19:24] Speaker 4: this is a tenure, medium ten, ten year trend. And
[19:29] Speaker 4: now we have a visibility to be the Yeah. And
[19:33] Speaker 4: the a t A uh mentioned is basically ABLA five years.
[19:39] Speaker 4: They have five year term a t A you know,
[19:42] Speaker 4: so over next five years, uh, this is the data
[19:47] Speaker 4: center driven demand situation will continue. And also technology wise,
[19:54] Speaker 4: the d M d M is really really big shortage,
[19:57] Speaker 4: you know, and the technology it's a you know, migration,
[20:02] Speaker 4: the more flow UH is a slowing down, you know,
[20:07] Speaker 4: because of them beyond one COMMA one cd M. I
[20:12] Speaker 4: think the migration is very difficult. And yeah, and also
[20:17] Speaker 4: the HPM HPM remained a portlet in the production, so
[20:22] Speaker 4: HPM four E especially there's a big increase in the
[20:26] Speaker 4: trade ratio, so even the memory makers are increasing capacity.
[20:33] Speaker 5: Yeah, before we wrap up, we don't have a lot
[20:37] Speaker 5: of time before we go to I just want to
[20:38] Speaker 5: ask you very directly, would you buy the stock at
[20:41] Speaker 5: this level? I'm looking at your price forecast this is
[20:44] Speaker 5: from June. Do you have an updated price forecast here?
[20:46] Speaker 2: Next?
[20:49] Speaker 4: Sure our update following their ownings and the guidance UH today. Well,
[20:56] Speaker 4: I think there's a number that not a major change
[20:59] Speaker 4: in our view because of fundamentally there's no changing in
[21:03] Speaker 4: the AI driven super psicher.
[21:05] Speaker 2: That was senior analyst as K. Kim of die Walk
[21:08] Speaker 2: Capital Market Korea speaking with Bloomberg TV host David Iglase
[21:12] Speaker 2: and Von Men bringing you their conversation here on the
[21:15] Speaker 2: Daybreak Asia podcast. Thanks for listening to today's episode of
[21:21] Speaker 2: the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look
[21:25] Speaker 2: at the story shaping markets finance and geopolitics in the
[21:29] Speaker 2: Asia Pacific. You can find us on Apple, Spotify, the
[21:32] Speaker 2: Bloomberg Podcast YouTube channel, or anywhere else you listen. Join
[21:36] Speaker 2: us again tomorrow for insight on the market moves from
[21:39] Speaker 2: Hong Kong to Singapore and Australia. I'm Doug Prisoner and
[21:44] Speaker 2: this is Bloomberg

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