SK Group Chairman Chey Tae-won described the surge in memory semiconductor demand triggered by the artificial intelligence (AI) investment boom as a “war-like situation,” forecasting that next year will be the most severe year for supply shortages.

In an interview with U.S. financial media outlet CNBC released on the 13th (local time), Chey said, “Next year will be the most severe year for memory supply shortages,” adding that “the volume customers are requesting for next year is nearly double this year’s.” He noted, “Expanding production capacity requires at least four to five years. Memory companies have not yet been able to prepare for capacity expansion.”

Chey explained that the vast majority of customers, including Big Tech companies, are asking SK Hynix to double their memory semiconductor volumes, but supply cannot keep up. “Everyone wants memory chips, but without memory, you cannot produce AI computing systems and AI chips,” he said, adding that the company is making efforts to expand production capacity as quickly as possible.

He also projected that the semiconductor supercycle will continue for a considerable period. His assessment is that the memory demand structure, which was previously centered on electronic devices such as smartphones, is undergoing a structural transformation as it expands to AI models. “In the past, one person bought one hardware device like a smartphone, but the AI era is different,” Chey said. “One person can use ten AI models, and every AI model requires more memory.” He added, “Countless AI agents will exist around the world going forward,” describing this as a turning point for the memory semiconductor market.

Regarding the “chipflation” phenomenon where soaring memory prices drive up finished product prices, he expressed concern. “PC, smartphone, and home appliance manufacturers, and even automakers, are struggling to secure semiconductors,” he said. “This raises prices across society as a whole. It’s not a good thing.”

U.S. Fab Construction Under Review and Supply Expansion Strategy

Chey said the company is reviewing various regions, including the United States, as candidate sites for semiconductor fab expansion. However, he emphasized that beyond basic requirements such as water, power, and land, an ecosystem for memory semiconductor production must be in place. “A semiconductor fab is supported by 600 to 700 partner companies that provide materials and chemicals,” he said. “If we can build this ecosystem, we will build fabs anywhere in the world.”

SK Group is responding to potential future oversupply through various approaches. SK Hynix is increasing long-term supply agreements (LTAs) with customers and is also reviewing the introduction of a “Memory-as-a-Service (MaaS)” model that continuously provides memory semiconductors and operational solutions. “We could also form fab joint ventures (JVs),” Chey said. “Long-term supply agreements will be renewed every year.”

He also emphasized that SK Group’s portfolio is optimized for building AI data centers. “AI also requires energy and networks,” he said. “SK Group has energy companies (SK Innovation) and network companies (SK Telecom), and these will build AI data centers going forward.”

SK Hynix Share Price Rebound

Chey’s remarks came at a time when SK Hynix shares are rebounding after a sharp decline. SK Hynix surpassed 2.91 million won (approximately $2,061) at closing price in June before plunging to 1.32 million won (approximately $936) on the 30th of last month. Since then, the stock has experienced extreme volatility, including a 30% surge the following day.

After the earnings announcement on the 29th of last month failed to introduce a new shareholder return policy, the stock languished early this month. However, concerns about the “memory peak theory” have largely dissipated, and investment sentiment toward memory semiconductor stocks has recovered, driving a 15.8% gain over the past four trading sessions. As a result, the stock has recovered to the 1.6 million won (approximately $1,133) level.

Chey had advised investors “not to buy and sell” at the Korea Chamber of Commerce and Industry summer forum held in Jeju on the 17th of last month, when SK Hynix shares were plunging. At the time, he said, “Memory will continue to be needed going forward, so if you look at it over time, it trends upward,” adding that “holding rather than buying and selling helps protect your assets.”