This image was created using AI to aid in understanding the article. [Korea Financial Times, Gwak Horyung] SK hynix is setting its sights on an unprecedented era of KRW 200 trillion in annual operating profit. In the first quarter alone — before the full impact of High Bandwidth Memory (HBM) has even kicked in — the company is projected to post operating profit of approximately KRW 40 trillion. The result reflects the DRAM price surge effect already confirmed by Samsung Electronics' earnings surprise. Meanwhile, NAND flash, which previously dragged on performance with persistent losses, is now expected to emerge as a new pillar of earnings, buoyed by the expansion of the artificial intelligence (AI) inference market. Q1 Operating Profit of KRW 40 Trillion According to financial data provider FnGuide on April 13, the consensus estimate for SK hynix's Q1 operating profit — set to be announced on April 23 — stands at KRW 34.5381 trillion. This figure has surged by approximately KRW 8 trillion in just three months from the KRW 27 trillion level at the beginning of the year. A closer look at brokerage estimates released over the past week suggests even this figure may be conservative. SK Securities (KRW 39.88 trillion), Korea Investment & Securities (KRW 38.49 trillion), Heungkuk Securities (KRW 40.1 trillion), Kiwoom Securities (KRW 40.28 trillion), and Yuanta Securities Korea (KRW 40.36 trillion) have all projected operating profit of approximately KRW 40 trillion. SK hynix operating profit estimates released between April 8 and 10. [Sources: respective brokerages, FnGuide] [Photo caption: SK hynix operating profit estimates released between April 8 and 10. Sources: respective brokerages, FnGuide] This is because Samsung Electronics' preliminary results, released on April 7, showed operating profit of KRW 57.2 trillion — exceeding consensus by 50% in an earnings surprise. The DRAM price increase exceeded expectations, and earnings estimates for SK hynix have risen in tandem. Brokerages have revised upward their estimates for the quarter-over-quarter increase in DRAM average selling prices (ASP) to 60–80%, an upward adjustment of 10 to 20 percentage points. As a result, SK hynix's operating profit margin for the quarter is projected to reach the 70% range — a 30-percentage-point jump from the 42% recorded in Q1 last year. Even in Q4 last year, when the company posted its all-time quarterly record, its operating profit margin stood at 58% (operating profit of KRW 19.1 trillion). NAND Flash's Dramatic Transformation Another key focal point in this quarter's results is NAND flash. SK hynix had posted losses in its NAND flash business during the first half of last year, as the segment's underperformance persisted. However, the tide has been turning since the second half of last year. With the AI inference market — driven by services such as ChatGPT — expanding rapidly, both demand and prices for NAND flash have surged. While the DRAM market, including HBM which handles high-speed data transfer, was the first to grow, analysts note that NAND flash — a type of non-volatile memory capable of efficiently managing data, such as storing previously generated responses — has now come into the spotlight as well. At its January earnings call, SK hynix emphasized that "NAND flash is completely transforming from a mere peripheral device into a storage solution that supports AI computation," and that "inference operation technology that optimizes the AI computation process is essential." A mock-up of the NVIDIA Vera Rubin equipped with SK hynix HBM4./ Photo = SK hynix] Kiwoom Securities estimated that SK hynix posted KRW 9.4 trillion in operating profit from its NAND flash business in Q1. This figure is more than four times higher than the previous quarter and up to double the estimates from other brokerages — an aggressive projection. Kiwoom estimated that the quarter-over-quarter increase in NAND flash ASP reached 81%, surpassing the DRAM ASP increase of 55%. Furthermore, SK hynix has embarked on standardizing High Bandwidth Flash (HBF) with U.S.-based Sandisk to gain a first-mover advantage in next-generation NAND flash technology. HBF is a new form of memory created by stacking NAND flash chips to increase capacity. Similar to HBM, it is being developed to resolve memory bottleneck issues. KRW 300–400 Trillion by 2027... LTAs as a Buffer Against Downturns SK hynix's estimated full-year operating profit for 2026 ranges from KRW 200 trillion to KRW 300 trillion. DRAM shipment growth is expected to accelerate further from Q2 onward, when HBM4 revenue begins to be fully reflected. While the current explosive pace of price increases is widely expected to moderate somewhat, expectations are growing that if long-term agreements (LTAs) — three-to-five-year supply contracts being demanded by global Big Tech companies from memory suppliers including SK hynix — become firmly established, the current historically high level of profitability could be sustained stably for years to come. Yuanta Securities Korea projected SK hynix's 2027 operating profit at KRW 423 trillion — nearly double the consensus of KRW 237 trillion. Yuanta Securities Korea noted that "across the memory industry, long-term contract prices are being set higher than expected, in a pattern distinct from previous cycles." Gwak Horyung ([email protected]) Copyright © 한국금융신문 All Rights Reserved.