SK hynix headquarters in Icheon, Gyeonggi Province. News1
Global Big Tech companies have proposed investments worth tens of trillions of won to SK hynix (000660.KS) to secure memory chip supply, according to sources. The offers reflect efforts to sound out investment in memory production lines, a core piece of infrastructure, in a bid to win the artificial intelligence (AI) industry race.
According to industry sources Wednesday, SK hynix has recently received proposals from global Big Tech companies to invest in production lines at the Yongin semiconductor cluster and to provide funding for the purchase of ASML’s extreme ultraviolet (EUV) lithography equipment.
Big Tech firms have also proposed making direct investments in the first plant (Y1), which SK hynix is building at the Yongin semiconductor cluster with a total outlay of 31 trillion won ($22.5 billion), industry sources said.
Behind Big Tech’s blank-check offers is an unprecedented “memory supply crunch.” As investment in the AI industry expands, demand for general-purpose DRAM and high-bandwidth memory (HBM) is surging explosively. On top of this, demand for NAND flash, which stores the massive volume of data generated during AI inference, has also spiked. As a result, SK hynix’s first-quarter DRAM average selling price (ASP) jumped more than 60% from the previous quarter, while NAND flash surged more than 70%.
But production capacity to meet the soaring demand is insufficient. According to SK hynix, current spare capacity is effectively “zero,” and there is almost no additional volume that can be allocated to specific customers.
The industry views the latest proposals as a strategy to gain the upper hand in long-term agreement (LTA) negotiations. SK hynix, which holds the upper hand in supply, has recently set advance payments at around 30% of the total contract value, sources said. The company is also pursuing contracts under which transactions take place within pre-set floor and ceiling prices, even if memory prices fluctuate sharply.
In response, Big Tech firms are countering by proposing to share capital expenditure (CAPEX) with SK hynix. In return for being allocated dedicated production lines, they would cover part of the costs of equipment purchases and facility investment.
SK hynix remains cautious about Big Tech’s bold proposals. Building production lines with funding from a specific customer could create risks, including having to prioritize allocation to that customer when demand from it falls in a future downturn, or having to supply products below market prices. “Various discussions are underway to bind global Big Tech firms as we sign memory LTAs,” an SK hynix official said.
Construction site of SK hynix’s Yongin cluster. Yonhap News