SK Hynix has established a 'rapid inventory turnover' structure that connects chip production directly to sales, driven by strong demand for high-bandwidth memory (HBM). The acceleration in sales has significantly increased inventory turnover rates, while also reducing the burden of inventory valuation losses, thereby enhancing the company's financial health.
According to SK Hynix's semi-annual report released on August 17, the proportion of inventory assets to total assets decreased to 5.2% in the first half of the year, down from 8.1% at the end of last year. Although total inventory assets rose by 25.9% to 17.9857 trillion won from 14.2894 trillion won during the same period, the growth rate of sales has substantially outpaced the increase in inventory.
The inventory turnover ratio also increased significantly from 2.8 to 3.1 in just six months. This metric indicates that the time chips spend in storage has been reduced.
The rapid turnover is attributed to explosive sales growth. Revenue surged by 230.9%, rising from 39.8711 trillion won to 131.8950 trillion won, while the cost of goods sold increased by 36.2%, from 17.7858 trillion won to 24.2243 trillion won. The growth rates of both revenue and cost of goods sold have exceeded the rate of inventory increase, maximizing supply chain efficiency.
The qualitative composition of inventory also shows a clear positive cycle. Work-in-progress inventory, rather than finished goods, increased by 20.3% year-on-year to 11.0788 trillion won. This indicates that the production lines for high-performance products like HBM, which have high process difficulty and long lead times, are operating at nearly 100% capacity. Instead of accumulating 'bad inventory' in warehouses, the company is seeing an increase in 'good inventory' that already has designated owners during production.
As a result, the burden of inventory valuation losses has also decreased. The balance of the 'inventory valuation loss provision' for the first half of the year was 413.4 billion won, a 16.5% reduction from the end of last year, significantly lowering financial uncertainty.
Industry experts note that the memory semiconductor business is rapidly transitioning from traditional 'bulk B2B' to 'pre-order based high-value B2B.' In the past, during downturns, accumulated inventory often led to substantial valuation losses, increasing financial burdens. However, the current HBM-focused structure allows for timely supply and minimal inventory, greatly enhancing resilience to market volatility.
SK Hynix has secured long-term contracts based on pre-orders for next-generation HBM supply with major tech companies like NVIDIA. This structure ensures that sales channels and prices are established before production, particularly in the competitive landscape for high-performance memory for AI data centers. Given the nature of HBM, equipment investments and line operations are based on confirmed demand, significantly reducing inventory risk.
An industry insider stated, "Pre-orders from big tech companies like NVIDIA, Microsoft, and Google for one to two years, and in some cases up to five years, have become the 'new normal' in the industry. Moving away from the old model of running fabs and accumulating inventory, the focus on confirmed quantities has been key to accelerating inventory turnover and maximizing profitability."
* This article has been translated by AI.
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