Sk Hynix Inc S/Gdr 144A

This is Park Sung Hwan, head of IR at SK Hynix. Welcome to the SK Hynix 2026 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 DRAM marketing Park Jun Deok, head of NAND marketing Song Chang Seok, and HBM sales and marketing head Kim Ki Tae. Let me issue a disclaimer that our first quarter results included in this conference call are consolidated figures and provisional in nature as the external auditor's review has not yet been completed. Accordingly, they remain subject to change. In addition, forward-looking statements including market outlook and the company's plans may vary depending on changes in macroeconomic and market circumstances. With that, we will now begin SK Hynix earnings release conference call for first quarter of 2026. CFO Kim Woo Hyun will first present the earnings, followed by the company's future plans and market outlook, and a Q&A session with the attending executives.

Good morning, everyone.

This is CFO Kim Woo Hyun. Allow me to first introduce the company's performance for the first quarter of 2026. Although the first quarter is typically a seasonally slow period, robust demand driven by expanding AI infrastructure investment more than offset seasonality, and the supply environment remained tight. As a result, prices for both DRAM and NAND rose meaningfully, led in particular by server DRAM and enterprise SSDs.

Accordingly, first quarter revenue increased by 60% QOQ,

and 198% YOY to 52.6 trillion won, surpassing 50 trillion won mark for the first time on a quarterly basis and setting a new record high for quarterly revenue. Starting with DRAM, shipments in Q1 were similar to Q4 levels in line with our previous guidance. Within our supply capabilities, we focused sales on products with robust demand, including HBM and high-density server modules of 128 gigabytes and above, while ASB rose by a mid-60% as the strength in conventional DRAM pricing accelerated. For NAND, shipments declined by approximately 10% QOQ, reflecting a high base from the previous quarter sales, as well as reduced discrete product sales and longer production lead times associated with the shift in mix toward high-value added products where demand is rising rapidly. On the other hand, ASB rose sharply by mid-70%, supported by strong pricing in all product lines. As rising prices across both DRAM and NAND coincided with a greater contribution from high-value added products, first quarter operating profit reached 37.6 trillion won, increasing nearly twofold from that of the previous quarter. Operating margin also improved by 13 percentage points QOQ to 72%, marking another all-time high on a quarterly basis. In the first quarter, depreciation and amortization totaled $3.7 trillion, EBITDA came in at $41.3 trillion, and EBITDA margin was 79%. Net non-operating profit reached $14.1 trillion, reflecting, among other factors, foreign exchange-related net gain of $1.6 trillion due to the rise in exchange rates and valuation gains on investment assets of $9.9 trillion. Accordingly, pre-tax profit was $51.6 trillion, net profit was $40.3 trillion, and net profit margin was 77%. As of the end of the first quarter, cash and cash equivalents, including short-term investments, stood at 54.3 trillion won, an increase of 19.4 trillion won from the end of the previous quarter, while interest-bearing debt declined by 2.9 trillion won to 19.3 trillion won. As a result, the company recorded net cash of 35 trillion won and the debt-to-equity ratio at the end of the first quarter improved by 6 percentage points, from the end of the previous quarter to 12%. Now let me share our market outlook. AI technology is now evolving rapidly beyond the training phase of large-scale models into the inference and agentic AI stage, where user requests are processed in real time across a wide range of service environments. Accordingly, AI workloads are shifting from simple question and answer tasks to more complex processes that involve planning, execution, and verification repeated until the optimal result is achieved. As the volume of data generated by AI agents at each stage continues to increase, demand is rising for a broad range of memory products to process and store such data efficiently.

Beyond demand for high-performance memory like HBM,

The total volume of memory required across overall systems is also increasing, including server DRAM modules and enterprise SSDs.

As a result, the demand base is broadening for both DRAM and NAND. In addition, ongoing software and hardware optimization efforts across the AI industry are serving as another driver of memory demand growth.

While memory efficiency technology may appear to reduce memory usage per device, in practice, it is evolving in a way that maximizes the amount of context that is handled per unit of memory and the number of users. This is expected to improve the economics of AI services, expand the overall market, and create a virtual cycle that further drives memory demand. Meanwhile, in the PC and mobile markets, some signs of demand softening have emerged, including adjustments in set shipments and changes in product portfolios due to cost pressures stemming from higher memory prices. However, robust server memory demand continues to offset this weakness and is driving overall market growth. As memory becomes increasingly critical in AI computing, demand for high-performance memory is surging while supply remains constrained. Amid this supply-demand imbalance, customers are prioritizing securing volume over pricing, which is sustaining the current pricing strength. Accordingly, we expect a favorable pricing environment to continue for the time being.

Next, I will discuss the company's plans.

For the second quarter, we plan to actively respond to demand for high-density server modules and mobile products, with DRAM shipments expected to increase by a high single-digit percent QOQ. For the end, we expect shipments to increase by a mid-10% QOQ through expanded sales of 321-layer base products and enterprise SSDs. In the HVM business where we are leading the market, competitiveness is determined not only by the REM process technology, but also by a combination of diverse technological capabilities, including TSV and packaging. In addition, comprehensive execution capabilities encompassing performance, yield, quality, and supply stability are critical. Therefore, we are concentrating our efforts on further strengthening these capabilities. For HBM4, we have been working closely with customers from the early stages of development, and we plan to ramp up volume in line with the agreed schedule of products that meet the customers' required performance levels. In response to increasingly diverse memory requirements driven by the evolution of AI technology, we continue to develop and supply new products across both DRAM and NAND. In DRAM, during the first quarter, we completed development of the industry's first 1C nanometer-based LPDDR6. Compared with existing LPDDR5X, the product delivers a 33% improvement in data processing speed and more than 20% better power efficiency. We plan to begin full-scale market supply in the second half, starting with adoption in a major smartphone customer's next-generation flagship model. In addition, we began mass production this month of our 192GB SOCAM2 product based on our most advanced 1cNm process optimized for NVIDIA's Vera Rubin platform. This product delivers more than twice the bandwidth of conventional RDEMs and over 75% improved energy efficiency.

For NAND,

As demand for high-performance, high-density storage continues to expand in earnest, we will proactively capture growth opportunities. First, we have begun supply of PQC21 client SSD, the first product from our company to adopt CTF-based 321-layer QLC technology. Starting with the client segment, we plan to build a well-balanced product lineup across the entire enterprise market spanning high-performance TLC and high-capacity QLC in order to respond flexibly to broad-based AI demand. In particular, based on synergies with Solidigm, which has strength in high-capacity QLC enterprise SSDs, we will further strengthen our competitiveness in addressing a wide range of customer needs in the AI data center and AI PC storage markets. As customer demand continues to exceed our supply capabilities, securing sufficient supply capacity to respond to structural demand growth in the AI era is emerging as a core competitive advantage. Accordingly, our CAPEX this year is expected to increase significantly compared with last year. with the majority allocated to infrastructure preparation centered on the Yongin Cluster and ramp-up of M15X and to the procurement of key equipment such as EUV tools. Given that semiconductor manufacturing infrastructure takes several years from initial construction to actual operation and that securing key equipment also involves substantial lead times, we will strategically secure the production base needed to respond proactively to meet long-term demand growth. While adhering to CAPEX discipline, we will execute investments based on demand feasibility, thereby ensuring both supply stability and financial soundness. Lastly, let me address our financial soundness targets. and shareholder return policy. The memory market is facing an unprecedented growth opportunity at the center of the AI era. Given the high return on investment demonstrated by our first quarter results, we believe that reinvesting the cash we generate back into the business is currently the best use of capital. Therefore, we will strengthen our financial soundness to secure the foundation for long-term growth so that we can continue to execute the investments that are strategically necessary over the long term under any market conditions. Considering our all-time high profit generation, we believe that achieving financial soundness with net cash of more than $100 trillion and expanding shareholder returns are goals that can be pursued in parallel. In addition to dividend, we will also actively review additional shareholder return measures such as share buybacks and cancellations, and establish an implementation plan within the year. Meanwhile, on March 24, we confidentially submitted a registration statement to the U.S. Securities and Exchange Commission related to the proposed ADR offering, and we are proceeding with the goal of listing on the U.S. securities markets within the year. However, specific details of the proposed offering, including its size, structure, and timing, have not yet been determined, and the final decision on whether to proceed with the listing will be made after comprehensively considering the SEC's review of the registration statement, market conditions, investor demand, and other relevant factors.

We will provide further updates once specific details are finalized.

Going forward, we will continue striving to enhance shareholder value by maintaining the optimal balance among investment for future growth, financial soundness, and expanded shareholder returns.

With that, we are now ready to take your questions.

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 Loho Kim from Hana Securities.

Please go ahead with your question. Thank you for taking my question.

Now my question is, the memory spot prices have been on a steep upward trend, but are now showing some signs of weakness. Some are concerned that this may be a signal of a peak out with the demand beginning to soften due to the price burden. But does the company see this as just a temporary adjustment caused by short-term supply and demand factors? So what is the company's view?

We understand that there are various interpretations in the market regarding the recent spot price movements.

So, let me share with you the company's perspective.

Also, the types and sizes of products that are distributed

First of all, the spot market itself takes up a very small part of the overall DRAM market, and the types and volume of products that are traded there differ considerably from our business. So we can't really view these changes in the spot market as reflective of the overall market.

On one hand, we see that the memory demand from our major customers is increasing across the board.

including HBM, server DRAM, and ESSD. On the other hand, for the suppliers, the reality is that the suppliers find it hard-pressed to increase supply in the short term.

And as such, supply-demand imbalance persists,

the rising memory price cycle is likely to last longer than in the past.

So the moderate trend in spot prices, rather than being a sign of market peak out,

appears to be a temporary phenomenon resulting from some inventory entering the market from some distribution channels due to the recent price increase.

The following question will be presented by Sinwoo Kim from Merit Securities. Please go ahead with your question.

Hello, I'm Kim Sunwoo of Merits. I just heard a good explanation about the spot price. Currently, I would like to ask you in general. The current super cycle is continuing to lead to a strong rise in the price of memory. What do you think the overall memory price flow will be in the future? Please share your opinion. Thank you.

Thank you very much. So the prior question was about the spot price, and my question is more about the overall price cycle. Because at this time, it seems as if the unprecedented super cycle is driving up the memory prices. Then what is the company's outlook on the memory price trends down the road?

Yes, I think this price increase in memory is not a temporary imbalance of supply and demand, but a structural change in the market. 따라서 과거와는 다른 흐름을 보일 것으로 전망합니다.

We see that the current price strength is driven by structural changes in the market, not by the temporary supply-demand imbalance. And that is why we also expect that this trend to be different.

먼저 AI 기술의 발전으로 메모리의 중요성이 그 어느 때보다도 커졌고, IT companies are making competitive purchases to secure more memory.

First, the importance of memory has grown more than ever due to AI, and IT companies are competitively increasing their purchase to secure more memory supply.

On the other hand, the industry's supply has declined since the last downturn, and due to the lack of available space, 단기간 내에 유의미한 생산 확대에 한계가 있습니다.

On the other hand, industry supply has been constrained by investment slowdown following the last downturn and also by the shortage of available space, which limits the potential for production expansion for the short term.

공급사들은 중산 여력을 확보하기 위해 신규 펩 건설과 Suppliers are expanding their investment by resuming fab construction and infrastructure investment to secure ramp-up capacity.

But it will take some time to complete meaningful new clean rooms and production capacity.

As this supply demand imbalance persists, customers are prioritizing procurement over price,

And the growing importance of memory in AI computing is also being priced in. Therefore, the favorable pricing environment is expected to continue for the time being. Yes, please ask the next question. Thank you. Next question, please.

The following question will be presented by Nicholas Garois from UBS. Please go ahead with your question.

Yes, good morning. Thanks for taking my question. Could you provide us an update on the current progress on your enhanced and new long-term agreements and the timeline for their expansion? Could you specify how do they differ from past LTAs, whether they apply to DDR, NAND-FASH, and HBM alike, or more so DDR? And could you share the specific terms and conditions to the extent you can disclose them? Thank you.

Thank you for the question. The question I would like to ask is about LTAs. I know that you are promoting LTAs that have improved a little more compared to the past. Please tell us about the current situation related to this. And I'm curious about when the expansion will be. Also, what is different from the past LTA, and which product will be applied mainly, whether it is DDR, HBM, or NAND flash, etc.

Thank you very much for the question.

And yes, I will try to explain to the extent possible. Now, as the memory shortage persists, customer requests to secure medium to long-term supply volumes have significantly increased.

고객들은 향후 가격과 공급 불확실성을 사업의 핵심 리스크로 인식할 만큼 메모리의 중요도가 매우 높아졌습니다. 당사 역시 수요 가시성 확보를 통한 투자 부담 완화는 중요한 과제입니다.

Memory today has become so critical that customers now see memory price and supply uncertainties as key business risks. And for the company as well, reducing investment burden by securing demand visibility is one of our key priorities.

Danyeon LTA는 고객에게는 공급 안정성을, 당사에게는 수요 가시성과 보다 안정적인 수익 구조를 제공하여

A multi-year LTA must provide business stability for both parties by ensuring supply stability to the customer and demand visibility and stable revenue structure to the seller.

However, due to the current supply restrictions, there is a limit to accepting all requests from customers.

Accordingly, unlike past LTAs, we are comprehensively reviewing various approaches and structural options, but due to current supply constraints, we are limited from accommodating all customer requests.

If the LTA is stable,

If multi-year LTAs are successfully established, we expect investment efficiency to naturally improve thanks to demand visibility and stable profitability.

또한 과거 반복되어 왔던 메모리 산업의 변동성을 축소함으로써

Not only that, it can also reduce the volatility that has repeatedly plagued the memory industry, which can improve the market's overall view on the memory business as well.

Thank you.

Next question, please. The following question will be presented by SK Kim from Daiwa Securities. Please go ahead with your question.

Thank you for your question. First of all, thank you for your good performance. Congratulations. I have a question about AI technology. I think you mentioned it in your speech. Recently, In order to respond to the lack of memory supply, we are continuously trying to improve the technology and product development. I think there is a concern that this flow will reduce our memory consumption in the future. I would appreciate it if you could tell us what your company's opinion is about this.

Thank you for taking my question. Thank you for the excellent presentation and congratulations. Now my question is about the memory or the AI technologies. And I believe that it was also mentioned during the presentation, but then we see that efforts today continue to develop technology and products to improve memory efficiency to address the recent memory shortage. So there are also concerns that such trend could dampen memory demand. What is the company's outlook on this?

As the AI inference market grows rapidly, it is true that new technologies are emerging to process the exponentially increasing

volume of data.

The company believes that these technological advancements will broaden the AI ecosystem and ultimately serve as the catalyst for driving overall memory demand. Some suggest that LPUs using SRAM could serve as a memory alternative.

But unlike GPUs, LPUs operate primarily by using the internal SRAM, which makes them very fast but also limits the physical capacity. So it is highly likely that we move toward a hybrid architecture where LPUs handle tasks requiring fast response and HBM-based GPUs handle complex and massive computations. In other words, As AS services diversify, memory will become increasingly tiered, and demand for high-performance memory is expected to continue.

On the other hand, there has been a talk about the possibility of reducing memory consumption as data is compressed to optimize KVC. However, the core of this technology is not to use less memory, but to use the same memory more efficiently At the same time, with the recent introduction of technologies that optimize KV cache by compressing data, there has been speculation that memory demand might decrease.

But the intent of this technology is not to use less memory, but to use the same memory more efficiently to provide a wider variety of AI technologies and services. To process longer context and perform more concurrent inferences, more memory is required. So as AI services become more widespread, memory demand is expected to increase.

While memory optimization technologies have been steadily emerging

The overall trend has been toward diversifying the AI market, lowering barriers to entry, and expanding the market's overall size. In response to the diversifying needs, we will continue to solidify our market leadership by supplying world-class AI memory products in a timely manner. Thank you for the response, and we will take the next question. The next question is from Ricky Seo of HSBC.

The following question will be presented by Ricky Seo from HSBC. Please go ahead with your question.

Thank you for your question. Congratulations on your good performance. I have a question about HPM4. Recently, there has been a lot of discussion about the market opinion on HPM4 certification and mass production. Thank you for taking my question and also congratulations on the outstanding performance.

My question is about HBM4. Now, regarding the HBM4 qualification and mass production, it seems as if the market views currently remain mixed. So, what is the update on HBM4 qualification and the expected timing for full-scale shipment? And also, if possible, by the end of this year, what is the company's expectation about the HBM4's share out of the total HBM?

Thank you for the question. I will answer it.

From the customer's perspective, HBM is a business where overall competitiveness is seen to be more important than any single factors like performance metrics such as speed and power efficiency.

or quality, yield, or supply stability.

For our HBM4, we have established a proactive development and supply system in close collaboration with major customers from the early stage, and we are getting ready to ramp up production and supply products that meet customers' requirements in a timely manner, in line with each customer's mass production schedule.

It has reached the highest level in terms of overall product competitiveness and trust in the business from customers. Based on this, we are advancing the market by strengthening technology leadership in next-generation products such as HBAN4 and HBAN4E. As reflected in this, the demand for customers to distribute to the company for the next three years is already much higher than that of the company's supply cap.

Since the launch of HBM2E, we have maintained the highest level of overall product competitiveness in time to market, cost, yield, and performance, as well as customers' trust. We have built on that basis to keep strengthening our technological leadership and lead the market with next-generation products such as HBM4 and HBM4E. It is evidenced by the fact that customers' demand for the next three years far exceeds our current supply capacity.

It is evidenced by the fact that customers' demand for the next three years far exceeds our current supply capacity.

We are doing our best to supply as much HBM as possible to our customers. Given the severe supply shortage affecting not only HBM but also the general-purpose DRAM, we are trying to achieve optimal allocation between HBM and general DRAM for the sake of balanced growth in the AI ecosystem, rather than trying to maximize revenue.

Moving forward, we will sustain our market leadership based on our product capabilities, including HBM3E and HBM4.

Thank you.

We'll take the next question.

The following question will be presented by Youngmin Ko from Dale Investment and Securities.

Please go ahead with your question. Thank you.

Thank you for taking my question, which is about investment. Now, recently we see other companies are announcing aggressive investment expansion. Does the company also plan to expand investment to maintain market share and competitiveness? And also, on the other hand, it is understandable if there are some concerns about past oversupply issues recurring. So I wonder what the company's view would be regarding investment and also about such concerns.

Thank you very much for the question.

The company's policy is to execute investment with CapEx discipline, taking demand visibility into account.

Given the current sustained robust demand for memory, we expect investment in 2026 to increase significantly YOY,

To prepare future infrastructure and secure key equipment to meet demand.

Specifically, we are quickly building a cross-step construction for the acquisition of medium-term production capacity. Following Phase 1, which will be completed next year, we are planning to invest in it gradually to finish Phase 2 and Phase 6.

Namely, we are rapidly proceeding with the construction of the Yongin Cluster Fab to secure mid-to-long-term production capacity. After completion of Phase 1 early next year, we plan to execute investment in stages to complete Phases 2 through 6.

Next year, we will continue to invest in essential equipment for industrial and industrial development.

In addition, we plan to move ahead as scheduled with investment in the equipment necessary for the migration to advance processes through next year.

In addition, we plan to move ahead with investment in the equipment necessary for the migration to advance processes through next year.

So as you can see, we are actively expanding supply to meet customer demand, for example, increasing our investment. But also at the same time, it appears that supply will remain short of demand for the time being. So for the time being, the supply will fall short of the structural increasing demand.

Yeah. And that is also why we are closely monitoring demand changes by strengthening our customer intelligence system and continuously reviewing supply demand environments against the medium to long-term demand visibility secured through our long-term customer relations.

Now, at this time, both customers and suppliers agree on the importance of securing long-term visibility into supply and demand, so there should be no major concerns about oversupply as in the past.

Thank you, and we'll take the next question.

The following question will be presented by Yeh-Hyun Kwon from J.P. Morgan. Please go ahead with your question.

Thank you for the question. I'm Kwon Jae-hyun from J.P. Morgan. In the opening speech, you said that the use of enterprise SSDs will be expanded. In the opening presentation, it was also mentioned that the enterprise SFT demand is also growing.

So with demand driven by AI expected to fuel rapid growth in NAND demand as well, then what is SK Hynix's plan to meet future market demand?

As you said, NAND is expected to grow in the long term as a key component that determines the speed and efficiency of production over a simple storage device.

Yes, as it was rightly observed, NAND is no longer a simple storage device, but a core component that determines computational speed and efficiency, and it is also projected for long-term growth.

As the AI model becomes more advanced, the middle data processing, which is called KVCash, is increasing explosively. In order to accept this, customers are introducing high-performance and high-capacity ESSDs.

Now, as AI models develop further, the volume of intermediate data processing, known as KV-Cache, is increasing exponentially. And that is why customers are now adopting high-performance, high-capacity ESSDs on a large scale.

This is a plan to actively respond to technology enhancement and production volume in a limited supply and investment environment.

So the company plans to actively address this demand by strengthening our technological capabilities and expanding production capacity, even under the constraints of limited supply and investment conditions.

First of all, the company developed the first 321 QLCs in April this year, completed customer certification, and secured a technical supercharge. In the future, high performance, high capacity, First, in April this year, we developed the world's first 321 layer QLC

and completed customer qualification, securing an overwhelming technological lead. And looking ahead, we aim to flexibly address the increasingly tiered AI storage demand by establishing an optimal product lineup that covers both high performance and high capacity. And we will ultimately further strengthen our ESSD-centric product mix, to proactively address market changes driven by the growth in KB cash.

We expect a very significant effect in terms of productivity.

We are also accelerating our tech migration. To maximize speed production, we plan to migrate more than 50% of our domestic production to 321-layer technology by the end of this year. And this two-generation jump from 176-layer to 321-layer is expected to yield significant productivity gain for the company. As the growth potential continues to strengthen in the NAND market along with the AI market, we plan to expand our influence within the NAND market through flexible and proactive investment in line with market conditions. Thank you. Next question, please.

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

I'd like to ask you about the next generation of memory. Recently, as the AI industry has developed and the performance has developed in various ways, it seems that the demand for memory for new uses and purposes has increased a lot in addition to HBM. Congratulations on the performance and thank you for taking my question.

My question is more about the long-term view. So as the AI industry continues to develop with growing need for computation, it seems as if there are growing demand for other applicability and purposes for memory. So the question is, then, for the company, then, how is the company preparing for such next-generation memory market post-HBM?

AI market expansion Thank you for the question about the next generation memory.

So I will respond to the question about DRAM and the other will follow up with the question on NAND. Now, as you see, the AI market continues to grow. New platforms are emerging and technologies are creating a multi-tiered memory architecture and broadening application areas leading to increasingly diversified demand for AI memory. The company is closely following these technological developments and customer needs, trying to identify them early on, and are systematically preparing to respond to the next generation AM memory market in a timely manner.

먼저, 원시나노미터 LPDDR5X 기반 192GB SOCAM2 제품을 이번 달부터 본격 양산하여 고객에게 공급할 예정입니다. 이 제품은

First, we plan to begin mass production and supply of our 192GB SOCAM2 product based on 1C nanometer LPDDR5X starting this month. This product delivers more than twice the bandwidth and over 75% improved energy efficiency over existing RDIMs, making it optimal for high-performance AI computing.

Also, I think CX's pooling solution will be one of the alternatives for KB Cache offloading, which is growing rapidly due to the expansion of the output temperature. In this respect, we will continue to develop CX's 2.0-based

As the demand for inference grows, there is the CXL pooling solution which can serve as one option for offloading the rapidly increasing KV cache. And building on our first-generation CXL memory modules based on CXL 2.0, which completed customer qualification last year, we aim to maintain our leadership in this emerging market by delivering enhanced capacity and performance in our second-generation products that support CXL 3.0.

In the actual AI service environment, CXL, PIM, etc.,

In fact, we already signed an MOU with a cloud provider last year to validate and optimize next-generation AI solutions such as CXL and PIM in real AI service environments.

to be used as the starting point to actively expand our technical partnerships with global customers.

Meanwhile, in NAND, we are preparing next-generation storage solutions to build high-performance, high-bandwidth, and high-capacity storage infrastructure tailored for AI workloads. HBF is a technology that can deliver ultra-high bandwidth through 3D stacking. And we launched a consortium last February to standardize its specifications. And looking ahead, we aim to continue to lead new markets, not only in DRAM, but also in NAND, through the push for global standardization and commercialization of HBF.

We will continue to develop optimized memory solutions that are right for the AI environment, like edge AI and physical AI,

and we will continue to strive to further solidify the AI memory leadership that we have established through HBM.

Yes, please ask the next question.

Thank you. Next question, please.

The next question is from Lee Se-cheol of Citigroup. The following question will be presented by Peter Lee from Citigroup. Please go ahead with your question.

Hello, I'm Lee Se-cheol of Citigroup. I also have a question about the next-generation product. You have updated the HEM4 in advance. In the market, there seems to be a lot of interest in the change from HEM4 to HEM4E in the future. I'm curious about the advantages and disadvantages of SKINX's technology competitiveness in HEM4E in the future, and what are the differences compared to competitors. Thank you very much.

My question is also about the next generation product. So we just got an update on the HBM4, and there is also growing interest in the market about the next generation, the HBM4E. So the question is, then what are the key factors that will contribute to the company's technological competitiveness in the HBM4E? And also, how can you differentiate from other companies? And please also explain the packaging technology and logic dye deployment plan.

Yes, thank you for the question. I will answer it. Currently, our company, H&M 4E, is preparing for a close cooperation with the customer and product specs. We are planning to supply samples in the second half of the year. Thank you for the question.

Now for the HBM-4E, we are preparing it in close consultation with our customers regarding the shipment schedule and product specifications. Our internal plan is to start supplying samples in the second half of the year, and we are moving ahead smoothly with development targeting mass production in 2027.

First, the base die to be used in HBM4E is under development based on the optimal technology

to meet customer performance requirements, and the work is moving on smoothly in collaboration with our customers.

Also, COODAI is planning to apply 1C Nanomirror to meet the higher customer performance requirements. The company's 1C Nanomirror has proven to be of the highest performance in the industry, and has begun mass production since the end of 2025, and the yield and mass production capacity has already reached the maturity stage.

And the Cordai will adopt 1C nanometer technology to meet growing customer performance requirements. Our 1C nanometer technology is proven to deliver industry-leading performance. Mass production began in late 2025. and both yield and mass production capabilities have already reached a mature stage.

And this will help us supply HBM4E to customers with stable performance and volume.

And we plan to develop HBM4E in a timely manner through further technology internalization and customer validation, and to keep maintaining our leadership in HBM technology through unparalleled mass production capabilities and product quality. Thank you, and we will take the next question.

The following question will be presented by Jongwook Lee from Samsung Securities. Please go ahead with your question.

Yes, thank you for the question. I heard well about the investment plan earlier, but I would like to ask for additional comments on infrastructure investment. First, please share the direction of Y1CEP operation that will be opened next year. Thank you for taking my question.

Now, there was a response about investment earlier, and my question is more specifically about infrastructure investment. So, what is the operational direction for the Y1FAB, which is scheduled to open early next year? And also, are there any plans by the company to build or acquire additional fabs outside of Yongin to secure medium to long-term production capacity?

Yes, I will answer that question. As for the construction of Yongin Fab, we decided to shorten the first phase of the base-1 clean room opening from May 27 to February 3. Currently, Yongin Fab's construction schedule is

To meet the medium to long-term demand, we have decided to speed up the opening of the Phase 1 clean room in Fab 1 by three months, from May 2027 to February 2027, and construction of the Yongin Fab is progressing on schedule.

The Yongin Cluster is the most advanced production unit in the world. It will be the core of our company's medium-term operation. Page 1 plans to produce DRAMs, and the products and techs that will be produced from page 2 to 6 will be continuously reviewed so that they can be operated efficiently according to the market demand.

The Yongin Cluster will become the largest state-of-the-art production complex in history and will serve as the bedrock of our mid- to long-term operations. Phase 1 is to produce DRAM, and we intend to continuously review the products and technologies to be deployed in Phases 2 through 6 to ensure efficient operations that are aligned with market demand.

At the current point of view, there are no additional construction or purchase plans except for Yongin, but since the impact of being able to supply stably at the time when the customers want the product of the AI era is highlighted as the core competitiveness, we know that the ability to produce at a large scale and the secure supply system are the most important points.

Now, at this point, we have no plans to build or acquire additional fabs outside Yongin, but we also recognize that the ability to reliably supply the products that the customers want when they want them is emerging as a key competitive advantage in the AI era, which means securing large-scale production capacity and a stable supply system is more important than ever before. We will keep making every preparation necessary to respond flexibly to the global memory demand growth over the medium to long term.

Thank you.

We'll take the next question. The following question will be presented by Simon Wu from Bank of America. Please go ahead with your question.

Hello, I'm Woo Dong-jae from Bank of America. My question is about helium bromide, which is highly dependent on Middle East, tungsten that can be imported from China, and LNG supply shortage that can be used for high-mix self-development.

Thank you.

My question is about the commodities that SK Hynix requires. So, for example, the helium and bromine that are dependent on the Middle East, tungsten that is imported from China, and also LNG that is used for self-power generation by SK Hynix. So, with regards to the shortage of these materials, what is the impact on the company, and what is the company's strategy to secure the supply over the longer term? So, if you could provide us with an overall update about the commodities front.

I will answer your question. In the past, through the experience of the international crisis, we have seen a significant increase in the risk

Based on past experience in international conflicts, we are fully aware of the risks associated with commodities and energy supply resulting from geopolitical changes, and we have already secured our responses.

As for the key industrial gases like helium and bromine, we have already diversified our suppliers

and we also have built up sufficient inventory as well. So any short-term or long-term impact on our production capacity will be quite limited.

And for tungsten,

It is true that the prices have risen due to geopolitical issues recently, but then we already have secured sufficient inventory, and there appear to be no disruptions in supply, so there is no impact on our production.

In terms of strategy, the energy price has risen due to the support of crude oil and LNG exports, but And regarding electricity, energy prices have risen due to delays in oil and LNG export.

But we source LNG through long-term agreements, which keep the energy price fluctuations to the minimum. and any impact on our business will be limited. We will continue to closely monitor market conditions and try to minimize any risks in our business operations.

Thank you, and we will take one last question.

마지막으로 질문해 주실 분은 SK증권의 한동희 님입니다. The last question will be presented by Donghee Han from SK Securities. Please go ahead with your question.

네, 안녕하세요. SK증권 한동희입니다. 질문 기획 감사드립니다. 저는 주주환원과 그리고 ADR 등 지역가치 재고에 관련된 질문 드리고 싶습니다. Thank you for taking my questions.

My questions are about the company's effort to enhance corporate value, for example, shareholder return and ADR. Now, regarding the goal of 100 trillion won in cash announced at the shareholders' meeting, there are also concerns that shareholder return may fall short of market expectations along the way. Then what is the company's direction or plan for shareholder return policies? And also, could you give us an update about ADRs?

Yes, I will answer your question. In the midst of the growing size of service investment based on the increase in AI demand, global highest level of financial strength is essential for stable investment and customer demand that does not get affected by uptrends.

Now, as the scale of capital expenditure structurally increases due to growing AI demand, the company decided that securing global leading financial strength is essential to ensure stable investment that is not affected by market conditions and also to respond promptly to customer demand.

As I explained in the previous presentation, if we consider the ability to generate profits that has increased significantly compared to the past, we believe that we will be able to carry out the acquisition and acquisition of 재무건전사 확보와 주주화하는 확보를 충분히 병행할 수 있을 것으로 판단합니다. In addition, we plan to communicate with the market by preparing a year-round plan for the implementation of additional 주주화하는 실행방안, including self-serve, retail, and small business.

As explained in the presentation, given the company's significantly enhanced profit-generating capability, we believe that we can sufficiently balance between financial soundness and expanding shareholder returns. We plan to develop additional shareholder return measures within this year, including not only dividends but also share buyback and cancellation, and communicate with the market accordingly.

The company already demonstrated our commitment to shareholder returns,

through a total annual dividend payout of $2.1 trillion and cancellation of $12.2 trillion in shares in 2025. Going forward, we will actively explore ways to steadily increase returns to shareholders in line with our earnings growth.

In terms of ADR, the U.S. SEC's review is in progress. According to domestic law and regulations,

And about ADRs, the US SEC review is currently underway, and I ask for understanding that we cannot provide any information beyond what has already been disclosed in accordance with domestic and international laws and regulations. Having said that, we will communicate more details with the market once they are finalized.

Thank you.

With that, we conclude the SK Hynix 2026 First Quarter Earnings Release Conference Call. Thank you everyone for your participation.