Sk Hynix Inc S/Gdr 144A

Good morning, afternoon, and evening. I'm Park Sung Hwan, head of IR at SK Hynix. Welcome to the SK Hynix 2025 First Quarter Earnings Release Conference Call. Allow me to introduce the executives present here with me today. We are joined by CFO Kim Woo Hyun, head of DRM Marketing Kim Kyu Hyun, head of NAND Marketing Kim Seok, and head of HBM Sales and Marketing Kim Ki Tae. Let me issue a disclaimer that all outlets presented by the company are subject to change depending on the macroeconomic and market circumstances. With that, we will now begin SK Hynix earnings release conference call for the first quarter of 2025. CFO Kim Woo-hyun will present the earnings, which will be followed by the company's future plans and market outlooks. and a Q&A session with the attending executives. Good morning, everyone. I'm Kim Woo-hyun, CFO at SK Hynix. Allow me to first introduce the company's performance for the first quarter of 2025. Despite the expected seasonal demand weakness and customer inventory digestion, the memory market improved faster than anticipated. driven by Chinese subsidies for consumer electronics, intensified AI development competition, and some restocking demand. In this week's seasonality, we recorded $17.6 trillion in revenue, marketing our second highest quarterly revenue following the last quarter's all-time high. This represents a 11% sequential decrease, but a 42% increase year-on-year. Starting with DRAM, the shipment exceeded guidance. with the sequential decrease of high single-digit percent due to strong sales of high-value added products such as HBM3e and DDR5, as well as higher-than-expected sales for PCs and smartphones. ASP remained flat despite a decrease in conventional DRAM pricing thanks to expanded Thanks to expanded high-value product sales, HBM sales in particular continued growth with the expansion of HBM3E 12 high products as planned. NAND saw some price increase in the spot market due to production cuts in the industry, but demand recovery was relatively weaker than DRAM. Our shipments declined high 10% compared to the previous quarter as planned, and ASP dropped about 20%, mainly due to increased sales of discrete products driven by customer inventory restocking. Our Q1 operating profit was 7.44 trillion won, the second highest following the 8.08 trillion won recorded last quarter. Operating margin improved by 1 percentage points sequentially to 42% despite a decrease in revenue. We believe the improvement in operating margin during a market correction proves not only the structural transformation of the memory business due to AI, but also our strengthened competitiveness. We will continue our efforts to improve business fundamentals to improve to deliver differentiated results even during down cycles in the memory market. Depreciation and amortization expenses for Q1 slightly increased from that of last quarter to 3.33 trillion won. EBITDA stood at 10.77 trillion won with EBITDA margin of 61%. Non-operating gain netted loss reached 1.86 trillion won. Notable items include foreign currency related net gain of 0.12 trillion won due to strong US dollar against Korean won and 1.74 trillion won in other non-operating income such as valuation gains from investment in Kioxia. Pre-tax income was $9.3 trillion, and net profit was $8.11 trillion, with a net profit margin of 46%. In Q1, we completed the second closing of the solid-time acquisition and paid the remaining balance of $2 billion. Cash and cash equivalents, including short-term investments at the end of Q1, 14.3 trillion won, up 0.2 trillion won from the previous quarter. Interest bearing debt rose by 0.6 trillion won to 23.3 trillion won, and net debt increased by 0.5 trillion won to 9 trillion won. Consequently, our debt-to-equity and net debt-to-equity ratios improved slightly, QOQ to 29% and 11% respectively. Next, the company's market outlook and plan. Although we initially expected the memory market to recover towards the second half of the year, Tightened global certainties such as tariff policies have increased volatility in the second half demand projections. We will maintain close communication with customers and strengthen cooperation across the supply chain to meet customers' needs seamlessly amid this evolving environment. Looking at demand by application, We maintain our previous outlook on PC demand that the demand will be driven by replacement of PCs following Windows 10 end of support and the ramp-up of AI PCs. In smartphones, demand for high-performance memory is expected to continue with the adoption of AI models like small LLMs. Upcoming smartphone launches with enhanced AI features are expected to drive replacement demand further increasing demand for high-performance mobile DRAM such as LPDDR5X and LPDDR5T. In Q1, both PC and smartphone segments saw some demand recovery due to China's subsidy program and customer inventories are decreasing. While supply side remains tighter than expected, we have some preemptive purchases due to ongoing market uncertainties. Server market demand is accelerating as big tech companies race to develop high performance AI training and inference models. These companies are actively releasing new AI models and agents highlighting their commitment to investing in AI infrastructure. As a result, demand volatility in the server market is expected to be relatively limited. The release of efficient open source AI models like DeepSeq earlier this year has lowered entry barriers, allowing more companies and research centers to participate in the ecosystem. This is expected to stimulate demand for AI servers further. Additionally, many countries are building AI infrastructure at national level, which should positively impact long-term demand for AI memory. Meanwhile, in NAND, while AI impact has been relatively limited, Market recovery this year is expected to be fueled more from supply side factors. While demand remains somewhat muted, NAND suppliers are adopting conservative investment strategies and even production cuts for certain products, which will continue affecting the market positively throughout the year. In the mid to long term, Enterprise SSDs are expected to lead demand growth. Some big tech companies are considering replacing traditional HDDs with QLC-based enterprise SSDs for certain workloads. When we see more meaningful progress in these efforts, this shift will become a significant growth driver for demand market. Now I will discuss the company's plans for this year. Although market uncertainties are heightening, we currently anticipate a low 10% sequential increase in DRAM shipments and over 20% growth in NAND shipments in the second quarter. HBM demand. which is contracted a year in advance with customers, is expected to roughly double from that of last year as previously forecasted. The transition to HBM3E 12 high is progressing smoothly, and more than half of our total HBM3E shipments in QE will be 12 high products as planned. Due to the strong product competitiveness of our HPM3E12 high product, customer demand remains robust. We are optimizing product mix of our existing fabs and reallocating resources to ensure a stable supply of HPM that meets customer needs. In March, we shipped samples of HBM4, the mainstream product for 2026, to major customers for the first time in the world and reaffirmed our technological leadership. We plan to complete mass production preparation for HBM4 12 high within the year and will maintain our leadership in next-gen HBM markets. We also began shipping LPCAM2 high-performance memory module for AI PCs to certain PC customers in Q1. For SOCAM, low-power DRAM module for AI servers, we are preparing for timely supply of the product through close cooperation with customers. In NAND, While there are positive signs like rising spot prices and declining customer inventories, global uncertainties make it difficult to determine whether the recovery will be sustained. We will continue to focus on profit-oriented operational decisions and maintain a prudent approach to CAPEX spending. Constructions for the first fab in Yongin and M15X are progressing as planned. The Yongin fab broke ground in Q1 and is targeting completion by Q2, 2027, while M15X is scheduled to open in Q4 this year. Our strategy remains to prepare for future growth while maintaining flexibility in fab utilization based on market conditions. Given today's uncertain environment, we will continue to focus our spending on value-added products with high visibility, as we have previously emphasized, and also enhance investment efficiency even more than what we have done. Going forward as an AI memory leader, We will actively cooperate with partners, continuously overcome technological limitations, and maintain industry-leading product competitiveness so that we can continue our profit growth. Thank you.

With that, we are in. Now Q&A session will begin.

Please press star 1, that is star and 1, if you have any questions. Questions will be taken according to the order you have pressed the number star 1. For cancellation, please press star 2, that is star and 2 on your phone. The first question will be provided by Sunwoo Kim from Merit Securities. Please go ahead with your question.

Yes, hello. This is Sunwoo Kim from Merit Securities. I would like to ask you a question about tariffs. Recently, due to the US tariffs policy, the uncertainty of the business economy seems to be getting bigger and bigger. We need to keep an eye on the trend, but depending on the influence of tariffs, So I'm Kim Sungwoo from Merit Securities.

I do have a question regarding U.S. tariff policy. With the U.S. tariff policy, it seems that uncertainty in the business environment is growing. While we still need to keep an eye on how things are unfolding, how do you currently expect memory demand to change this year as a result of this tariff impact?

While reciprocal tariff measures between some countries are currently suspended,

There are growing concerns that tariff can be applied to semiconductor products. Given the high level of uncertainty surrounding tariff policy direction and its potential impact, we kindly ask for your understanding that it is difficult to provide a definitive answer at this point of time.

To share our current ongoing discussions with customers regarding supplies, global customers are generally maintaining their planned memory demand as previously discussed with us.

In fact, some customers are even requesting short-term supply pull-ins to expedite their demand.

PC and IT consumers such as smartphones are looking forward to the launch of a new product with AI features this year due to the risk of tariffs imposed for a while. Also, from the perspective of the final consumer, there is a possibility that the purchase will be hasty before the price drop,

For IT consumer goods such as PC and smartphones, tariffs are temporarily on hold for now. We are anticipating the positive impact of new product launches this year that feature AI functionalities. Additionally, from the perspective of end customers, there is a possibility that some of them may rush purchases before price increase, which could in turn stimulate replacement demand.

As for AI servers, we expect the impact of tariff on demand to be relatively limited.

We plan to respond in close cooperation with our customers to minimize potential disruption.

Next question, please.

Next question.

The following question will be presented by Simon Wu from Bank of America. Please go ahead with your question.

Yes, thank you for your question. My question is, is there a change in HBM demand and supply plans this year? As you may have seen, the background of my question is the release of a product by a major customer, My question is about the changes in HBM demand and supply plans.

As you know, there is ongoing speculation about the potential changes in the roadmap of major customers. And given export restrictions of certain GPU products to China, HBM product demand can also be affected. So, from your perspective, do you anticipate any changes in this year's HBM demand and supply plans?

Yes, I will answer your question. Due to the recent change in U.S. tariffs and regulations, the demand for memory-included semiconductors and for operating products that use these semiconductors has increased.

Due to recent changes in U.S. terror policies and regulations, uncertainties have increased surrounding the demand for semiconductors, including memory, as well as the semiconductor-based application products.

Accordingly, we are communicating more closely with customers than ever before and reflecting market changes. Therefore, what I can clearly say about the company's HPM business is that this year's sales plan for major customers

Accordingly, we are engaging in closer communication with customers than ever before to stay aligned with market changes. Regarding our HBM business, one thing that we can state clearly is that our sales plan for major customers this year remains unchanged from the levels agreed upon in existing contracts.

As the primary HBM vendor, we are supplying a full lineup of HBM products, including the most cutting-edge HBM3E12Hi.

Additionally, we maintain internally MAPS production capacity that allows us to flexibly respond to changes in customer demand.

This year's H-BAM sales have maintained an existing plan of more than two times the previous year, and the 12-stage product, which accounts for most of this year's H-BAM 3E sales, has not changed the existing plan of more than half of H-BAM 3E in the second quarter.

Our plan to more than double our HBM revenue year-on-year remains unchanged. Furthermore, there is also no change in our initial plan for HBM3E that this 12-high product, which constitutes the majority of this year's HBM3E revenue, will account for over half of the HBM3E sales in the second quarter.

Next question, please.

The following question will be presented by Peter Lee from Citigroup.

Please go ahead with your question. I'm Peter Lee from CD Security.

First of all, congratulations on your excellent first quarter performance. My question is about the high-capacity server DRAMs. Due to DeepSeq impact, demand for high-capacity server DRAMs is increasing, such as 96GB models. So can you explain the reasons behind this trend and what's your outlook for the future?

Thank you for the question. DeepSeq was able to dramatically reduce the cost of developing AI models through MLA, This makes it possible to implement AI of the same performance with less hardware resources. This seems to have greatly reduced the entry barrier of the AI development market.

DeepSeq utilizes multi-head latent attention, or MLA, which significantly reduces AI model development costs and enables the development of AI with the same performance with much fewer hardware resources. This has significantly lowered barriers to entry for AI development. With development costs decreasing, initiatives for AI development have surged, which has led to a sharp increase in demand not only for HVM,

but also for high-capacity server DIMMs.

During the first quarter, we also experienced rising demand for DDR5-based 96GB modules, And this year, we anticipate continued growth in demand for high-capacity teams for AI model development and inference workflows.

In addition, reasoning AI models such as OpenAI's O3 or DeepSeq's Aron will need more memory because they are adopting a method of long-term acceptance process for more accurate results.

Additionally, reasoning AI models such as OpenAI's O3 and DeepSeq's R1 extend inference processing time to achieve greater accuracy, which requires more memory.

AI models need more hardware resources to provide more precise results, and the center of the AI market is expanding from model training to input.

As AI models require more hardware resources to deliver more precise results, the AI market is transitioning from model training to inference-focused approach, which creates additional demand for high-capacity memory.

To ensure high quality inference services, continuous model training will be needed, which will inevitably lead to the expansion of high-capacity server infrastructure.

In this light, we believe high-capacity servers will be a key driver for mid-to-long-term server demand.

So, if the deep-seq is exploded and the AI development side is considered to have an expanded impact, it is expected that AI development and application will gradually expand in the future, and long-term AI server demand will increase and memory demand will increase.

So DeepSeq has acted as a catalyst to broaden the foundation for AI development. As a result, AI development and applications are expected to expand further, which will drive long-term growth in AI server demand and increasing memory demand.

Yes, thank you.

Next question, please. Next question. The next question is from Yoo Young-ho of NH Investment.

The following question will be presented by Young-ho Ryu from NH Investment and Securities. Please go ahead with your question.

Hello, I'm Young-ho Ryu from NH Investment and Securities. Thank you for your attention. I'd like to ask you a question related to tariffs. First of all, I'd like to know how much is the direct export ratio in the U.S. for SK Harness. As you mentioned earlier, there are still a lot of uncertainties and things that haven't been decided yet, I have a question regarding tariff.

So what portions of sales in SK Hynix is directly exported to the U.S.? Although you previously mentioned, uncertainty still persists and nothing has been determined and finalized yet. And therefore, how significant do you expect the business impact from tariff to be? And what's your strategy for responding to this?

Yes, I will answer your question. Considering the high AI sales ratio of our company, the American customer sales ratio is about 60% based on the legal basis in the thank you report.

Taking into account that AI-related products represent a high proportion of our sales, the percentage of revenue from U.S. customers is quite significant, approximately 60%, based on the corporate locations stated in our audit report.

However, as you know, the tax return standard is applied to the amount selected in the U.S., However, as you know, tariffs are imposed on shipments sent to the U.S., and sometimes even customers headquartered in the U.S., their memory product shipments often go to locations outside the United States,

Therefore, the actual percentage of direct export to the U.S.

is not that high.

Given the complexity of the global semiconductor supply chain, detailed information such as type criteria or the methods are required to precisely assess the impact.

Therefore, it is difficult to assess the impact accurately at this point of time.

So, in the future, around the time when the tariff becomes effective, we'll talk and collaborate with customers to ensure most stable supply possible.

Next question.

The following question will be presented by Junhee Lee from Goldman Sachs Securities. Please go ahead with your question.

Yes, congratulations on your good performance. I have a question related to demand relief and stock adjustment. I understand that it is a very flexible situation, but I would appreciate it if you could tell us how much the demand relief effect affects the 1st quarter performance and the strong 2nd quarter variance. And I'm especially curious about the risk of stock adjustment for customers. If demand is released in the first half of the year and customer stock increases, I'm Junyi Lee from the Goldman Sachs Securities.

I have a question regarding the demand pull-in and its impact, as well as the inventory adjustment. So how much impact did tech-related pull-in demand have on Q1 performance and Q2 guidance? If demand is pulled in during the first half of the year, This will lead to increased customer inventory. Then is there a risk that demand will decline in the second half due to inventory adjustment at the customer side?

Yes, thank you for your question. In the first quarter, as the policy was not yet finalized, some customers' full-in demand may have been included, but it seems that the amount was not that large.

So in Q1, care policies were not finalized as a result, while some pull-in demand from customers may be reflected in the results. It did not come in a significant way, and the impact was relatively limited.

The number of D-RAMs in the first quarter did not exceed the standard of the existing plan, and it is also limited to client products such as mobile and PC.

So our Q1 DRAM shipment exceeded original projection but not by a significant margin, and the increase was mostly limited to client products such as mobile and PC. In addition, we understand that customer inventory levels did not show significant changes either.

In Q2, key details such as country-specific tariffs

and the scope of items subject to tariff, they are still not yet finalized, which means customers will continue to have limited visibility into their demand. Therefore, it is unlikely that pull-in demand will increase significantly to a level that will trigger concerns about inventory adjustment.

The supply chain will also reflect the uncertainty of the market, which will lead to investment and production operations.

In addition, suppliers are also expected to reflect market uncertainties in their investment and production operations, which suggests that a drastic demand adjustment like the one that we saw during the pandemic is unlikely to occur in the second half of the year.

Next question. The following question will be presented by Nicholas Gadoys from UBS.

Please go ahead with your question.

Yes. Good morning. Thanks for taking my question. It seems to us that you may actually have recently decided to up your capex budget for 2025 and 2026. We have a slight policy schedule for equipment delivery for M15X within Q4, as you suggested in the call. Could you confirm this and clarify rationally, how does this factor in, in particular, the current uncertainty around types? And where would that put your total capex in 2025? And actually, where would you be going into 2026? Thank you.

Yes, hello. Recently, SK Hynix decided to expand its M50 Next schedule to 2025 and 2026 with the plan to pull in the M50 Next schedule. Please check if this is correct. And please explain why you made this decision. Yes, thank you for the question.

I will answer it. Thank you for the question.

Our company adheres to CapEx discipline, prioritizing investment only in product, with secured profitability. With the expansion of protectionist policies, such as tariff regulations and export restrictions, it has become more challenging than ever before to predict future market conditions.

In response to this uncertainty, the Party is planning to maintain a flexible investment structure although it is cautious this year. We will prioritize essential investments To mitigate these uncertainties, we plan to maintain a cautious yet flexible investment approach this year.

While prioritizing essential investments to meet market demand, will focus on future infrastructure investment, such as FAPs, to ensure that our technology leadership and competitiveness can be monetized at the right time. Our overall investment this year will see a slight increase compared to last year, which is in line with our existing investment direction.

In order to ensure stable business operations in a competitive environment In order to ensure stable business operation in the midst of highly uncertain external environment,

We will optimize product mix for existing fabs, reallocating resources away from low-demand and low-profitability products to enhance investment efficiency and strengthening financial soundness through continuous debt reduction and increased cash reserves. Next question, please.

The following question will be presented by Minsup Chai from Korea Investment and Securities.

Please go ahead with your question.

My question is similar to the previous question, but it is NAND spot prices have rebounded, and some believe that such increase in spot price comes from the customer demand for temporary investment buildup increase. Do you think NAND price recovery and demand growth will continue?

Yes, thank you for your question. The 1st quarter land market is a typical seasonal trend, and the demand for major applications was low, but there was a movement of pre-purchase in consideration of supply reduction and customs policy, mainly for part-time products or single products. In addition, there was a movement of pre-purchase in consideration Thank you for the question.

In Q1, demand in the net market for major applications remained weak due to seasonal factors. However, there were signs of preemptive purchasing, particularly for some channels and discrete products, mainly driven by tariff considerations and potential inventory reductions. Coupled with suppliers' production cutbacks, this resulted in a price increase

especially in the spot market.

In Q2, following the announcement of carry policies, uncertainties have increased around the recovery of demand, both for discrete products, where demand had increased in Q1, as well as for major applications. Having said that, NAND suppliers have maintained a conservative production stance since the second half of last year, which has helped ease downward pressure on prices. With the combination of production cuts by suppliers and increasing demand for higher capacity,

The price recovery trend is likely to continue in the short term.

While the pace of recovery in set demand will depend on how macroeconomic uncertainties unfold, the mid- to long-term trend toward higher capacity enterprise SSD is expected to continue. Therefore, we believe NAND demand will continue to grow.

Next question, please.

The following question will be presented by Ricky Sayo from HSBC.

Please go ahead with your question. I think the overall demand will increase as the supply increases. There is an opinion that the content growth of HBM4 will not go up as much as expected next year, so the demand will be reduced. What is the demand outlook for Hynix next year? Next, if you have any updates regarding the supply contract next year, please share them. That's all.

I have a question regarding the HBM market demand. Regarding the HBM market in 2026, there are mixed views. Some believe demand will grow due to inference AI, while others are concerned that slowdown in HBM adoption will hinder growth. So what's SK Hynix outlook on the HBM market in 2026? And how is the progress of your supply and contracting? Are there any things that you can update?

Okay, I'll answer your question. DeepSeq, which was first released this year, uses an efficient AI model to connect AI services at various levels.

The Deep Seek announced early this year demonstrated that if AI services are incorporated into various industries using an efficient AI model, it will have the potential to grow beyond existing forecasts and expectations.

While uncertainties will persist going forward, global enterprises continue to expand investments in AI infrastructure.

Not only enterprises, but even governments are actively working to build their own AI ecosystems. This has led us to believe, with no doubt, that HBM will continue to experience strong long-term demand growth.

Currently, our company is expecting HBM demand growth of about 50% per year from 2024 to 2028 based on demand validity. Based on demand visibility, we currently anticipate an average HBM growth rate of approximately 50% per year between 2024 and 2028.

Next year, HBM4 is expected to be our flagship product, as the number of I-O channels for HBM4 will double compared to the previous model. HBM4 will significantly enhance bandwidth efficiency, and therefore, they are expected to drive sustainable demand growth. As for 2026 supply volume, we plan to secure visibility for our annual supply volume with major customers within the first half of the year, in line with our existing plan. We will also finalize agreement with other customers thereafter.

Thank you for the answer. Next question, please.

The following question will be presented by Donghee Han from SK Securities.

Please go ahead with your question. I'd have a question regarding profit and profitability.

Despite a decline in revenue during Q1, your margin improved. Can you please elaborate on the background and provide more details on product-level profitability?

. . .

So seasonal weakness led to a decline in sales volume and falling land prices reduced revenue. Operating profit also saw a slight decrease compared to the previous quarter. However, in the highly profitable DRAM segment, operating profit margin improved slightly and DRAM share of total revenue grew from 74% to 80% quarter to quarter.

As a result, the overall operating margin also improved compared to the previous quarter.

Turning to product-level profitability for DRAM segment, despite a decline in conventional product prices, the overall profitability improved from the previous quarter, mainly driven by expanded sales of high-margin products such as HBM3E and GDR5. As for NAND, the revenue declined due to falling prices and lower sales volumes. However, the NAND segment remained in the black with positive profitability.

Next question.

The following question will be presented by Loho Kim from Hana Securities.

Please go ahead with your question. So I have a question regarding NAND.

Last year, enterprise SSD demand drove the NAND market growth. Do you expect this trend will continue this year? What are your plans for ESSD products for AI applications?

Thank you for the question. As the demand for AI became more serious last year, the demand for high-capacity, high-performance, and enterprise SSDs increased dramatically. The company is actively responding to demand based on high-capacity QLC ESSD product leadership,

With the rapid surge in AI demands last year, there was a sharp increase in the need for high-capacity, high-performance enterprise SSDs. Leveraging our leadership in high-capacity QLC eSSD products, we actively responded to this demand achieving over 300% growth in ESSD sales compared to year 2023.

This year, the uncertainty of the competition is growing, and it is expected that global companies' AI investments will continue, and ESSD demand will be stronger than other applications.

While external uncertainties are growing this year, global investment in AI is expected to continue, and we anticipate that demand for ESST will remain resilient and strong compared to other applications.

Especially this year, the demand for high-quality and high-performance AI is increasing, This year, demand has grown for generative AI inference services and for high-quality performance in terms of accuracy and speed.

As a result, data center servers now require expanded infrastructure, not only for memory but also for storing retrieved knowledge. We expect this will drive demand both for HBM and DRAM as well as for high-performance TLC enterprise SSDs.

On the other hand, high-performance TLC enterprise SSDs are expected to make significant changes in the QLC SSD market.

Significant shifts are also expected in the high-capacity QLC ESSD market, with demand transitioning from 61 TB last year to 122 TB this year, We plan to actively respond to this growing trend for higher-capacity ESSEs.

For example, we will continue to promote the development of 244TB products based on the 321st level of the world's highest-level ESSEs developed in November last year.

For example, leveraging our world's highest 321 high technology, which was introduced last November, we are advancing the development of 244 terabyte products to continuously lead the ultra-high capacity ESSC market going forward.

We'll take last question.

The last question will be presented by SK Kim from Daiwa Securities. Please go ahead with your question.

Yes, hello. Thank you for the last question. First of all, congratulations on your good performance. I have a question about the strategy related to DRAM. According to some recent survey data, SK Hynix is not only profitable in the DRAM market, but also occupies 1st place in sales. Considering the growth of the HBM market, the premium, and the leadership of the company, it is expected that this situation will continue in the future. I'd like to ask the last question, and congratulations on your excellent performance.

I do have a question regarding DRAM strategy. A recent market research report announced that SK Hynix ranked first in the DRAM market not only in terms of profitability, but also in market share. Given HBM's growth potential and premium positioning, SK Hynix's leadership in this market is expected to continue. So my question is about your response strategies for HBM and commodity markets.

Yes, thank you for your question. Our company, not only in terms of profitability, but also in terms of sales, The announcement that our company ranked first in the DRAM market in Q1 2025, both in terms of profitability and revenue, reflects that our portfolio strategies that focused on

Highly profitable AI memory was well executed. It also demonstrates our leadership in DRAM technology.

Therefore, it is important to develop a product that can respond to customer needs and produce it stably.

The HBM market is critical in AI semiconductor, and competitiveness is determined by technological leadership and the ability to cater to customer needs. It is essential to proactively develop products that meet customer needs and ensure stable mass production.

Dangsan is based on existing HBM development and production experience, and HBM4 is also based on early production development.

Based on our extensive experience in HBM development and manufacturing, we are actively pursuing development and customer qualification for HBM4 to accelerate mass production. We also work in close collaboration with our customers to ensure meticulous product quality. Furthermore, we plan to strengthen our production infrastructure by expanding fabs that are dedicated to produce high-performance DRAMs such as M15x in order to secure differentiated market responsiveness.

In the general DRAM market, managing a product portfolio which aligns with high-performance, high-capacity trend is essential, and we'll continue focusing on profitability-driven product mix. To that end, we are rapidly increasing the share of high-value products such as DDR5 and transitioning to high-density solutions like 24GB DDR5.

or 32 gigabit DRAM to enhance cost competitiveness and power efficiency.

Additionally, with our sales strategies closely aligned with customer needs,

we will enhance our demand forecasting capabilities and ensure stable market operation through flexible investment and production planning based on market conditions.

Thank you very much.

This will conclude the 2025 conference call.