Surpassing Samsung and outpacing TSMC in profit margins: How did SK Hynix become the "hidden overlord" in the AI storage field?

SK Hynix, leveraging its early lead in high-bandwidth memory (HBM), has shifted from being regarded as a “zombie company” follower to a key price setter in the AI industry chain amid the expansion of AI servers and a shortage of memory chips. It has surpassed traditional industry leaders in profitability and capital market performance.

Recent financial results highlight this transformation. According to the Financial Times, SK Hynix’s revenue in the fourth quarter grew 66% year-over-year, with an operating profit margin of 58%, surpassing the world’s largest foundry TSMC. Over the past 12 months, the company’s market capitalization increased by approximately 340%, reaching 640 trillion won.

The core driver is the change in supply and demand structure. The cyclical shortages of HBM, DRAM, and NAND have driven up prices, benefiting SK Hynix as a leading HBM supplier, with rapid margin expansion. The market has accordingly adjusted its leverage factor for SK Hynix in the AI cycle.

More importantly, customer relationships are strengthening. SK Hynix has captured over half of the global HBM market share, is a major supplier to Nvidia, and has recently been chosen by Microsoft as a supplier for its in-house AI chips.

Against the backdrop of SK Group Chairman Chey Tae-won proposing AI as the “Fourth Quantum Leap,” the company plans to invest $10 billion to shift from “chip manufacturing” to “AI solutions provider,” though competition, customer bargaining power, and geopolitical risks are increasing uncertainties.

Long-term Bet on HBM: R&D Priority and a “Hard-Playing” Organizational Culture

SK Hynix’s turning point was not overnight. Founded in 1983 within the Hyundai conglomerate system, it survived as a “zombie” controlled by creditors after the Asian financial crisis of 1997-98 and the oversupply of DRAM in the early 2000s. In 2002, Micron proposed a $3.2 billion acquisition but withdrew due to unwillingness to assume $6 billion in debt.

It wasn’t until 2011 that SK Group acquired Hynix for 3.4 trillion won, ending what was called “The Curse of Hynix.” Chey Tae-won then appointed veteran engineer Park Sung-wook as CEO, who promoted a strategy of “long-term R&D prioritized over short-term financials,” continuing investments in HBM before it was widely recognized.

From 2010 to 2024, the company’s R&D expenditure grew at an average annual rate of 14%. Chris Miller notes in his book that SK Hynix’s long-standing bet only paid off after ChatGPT ignited demand for AI servers.

Shortage of HBM and AI Boom Drive Up Prices and Profit Margins

The value of HBM lies in providing high-speed data throughput for AI training and inference, making it a critical bottleneck for AI servers. As demand surged, shortages on the storage side began to dominate industry profit distribution. SK Hynix’s high profit margins are a direct result of this structural “squeeze effect.”

According to HSBC research, the HBM market size grew from $1 billion in 2022 to $16 billion in 2024, with projections reaching $87 billion by 2027.

Professor Kwon Seok-joon of Sunkyunkwan University believes that storage shortages may persist until Q4 2027, as “forward capacity is being locked in early, and everyone agrees that storage is the current bottleneck.”

During this cycle, SK Hynix’s revenue increased from 44.6 trillion won to 97.1 trillion won over the past three years, demonstrating that its benefits have extended from “price increases” to “market share gains.”

The Key Battle to Surpass Samsung: Over Half Market Share Tied to Nvidia and Microsoft

In the core AI component HBM, SK Hynix has “outperformed” more well-known chip companies like Samsung, capturing over half of the global HBM market share and becoming Nvidia’s main supplier. Kwon comments that SK Hynix was once a “follower,” but is now a “shaper” of the industry.

The customer structure is also becoming more valuable. Besides Nvidia, SK Hynix has “recently been selected by Microsoft,” entering its in-house AI chip supply chain. These orders not only mean current shipments but also establish early advantages in defining next-generation products, customization capabilities, and yield requirements.

From Chips to “AI Solutions Company”: $10 Billion Capital Expenditure for the Next Stage

During the HBM boom, SK Hynix continues to ramp up its AI investments. The company plans to invest $10 billion to shift its focus from merely manufacturing chips to becoming an “AI solutions provider.” Chey Tae-won states that AI will be SK Group’s “Fourth Quantum Leap.”

Expansion is not limited to chips. Last summer, SK’s affiliated companies, including SK Hynix, launched South Korea’s largest AI data center project in Ulsan, with a scale of about 7 trillion won. Chey Tae-won announced that the company will build “the most efficient AI infrastructure” through a combination of “semiconductors and power and energy solutions.”

“New Worship” and Capital Migration: SK Hynix Becomes the New Goal for Young Koreans

The industry’s changing status is also reflected socially. According to the Financial Times, a survey of young job seekers shows SK Hynix has replaced Samsung as Korea’s most favored employer. Seoul National University student Lim Hee-jin describes its “high future potential,” and if friends join, “they would be envious.”

For investors, this trend of talent and capital concentrating in AI memory signifies that SK Hynix’s advantage is not only from a cyclical boom but also from its evolving position in HBM supply, customer validation, and technological iteration. The real test will be whether the company can convert current excess profits into control over next-generation products and ecosystems as HBM moves from scarcity to normalcy and customer demands and competition intensify.

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