SK Hynix CEO warns 2027 memory shortage to be worst in history

The global memory industry is heading toward its worst supply shortage in history by 2027, SK Hynix Inc. Chief Executive Kwak Noh-jung said, as demand for high-bandwidth memory used in artificial intelligence chips continues to outpace production capacity.

"We predict that, from a supply perspective, next year will be the worst in the industry's history," Kwak said, according to Reuters. The CEO added that memory demand will exceed the company's production capacity for the next decade despite ongoing expansion efforts.

SK Hynix, the world's leading supplier of high-bandwidth memory for Nvidia Corp.'s AI accelerators, controls 29 percent of the global DRAM market, trailing only Samsung Electronics Co. at 38 percent, according to Counterpoint Research data from June. The company recently completed the largest US listing by a foreign company, raising $26.5 billion through Nasdaq-listed American Depositary Receipts. The proceeds will fund expansion at its Yongin Semiconductor Cluster and Cheongju advanced packaging fab, along with 11.9 trillion won in extreme ultraviolet lithography equipment.

The warning comes as the three major memory makers — SK Hynix, Samsung and Micron Technology Inc. — prioritize high-paying AI customers over device makers, creating a bifurcated market where smartphone and PC manufacturers face allocation constraints. Counterpoint Research projects the three companies will post operating profit margins of 75 percent to 80 percent in the second quarter, with the supply-driven boom expected to persist through at least 2027.

SK Hynix briefly overtook Samsung as South Korea's most valuable company in May after reaching a $1 trillion valuation, driven by its dominant position in HBM3E memory used in Nvidia's Blackwell Ultra chips. High-bandwidth memory has become essential for AI data center buildouts, with tech giants like OpenAI, Microsoft Corp. and Alphabet Inc. using DRAM for the servers powering their AI models. Yet the company trades at a 20 percent to 40 percent discount to Micron on a price-to-earnings basis, a gap the Nasdaq listing is expected to narrow by improving global investor access.

SK Group Chairman Chey Tae-won said in June the company plans to ramp up memory chip capacity over the next five years to address a shortage that could last until 2030. The $26.5 billion raised from the ADR listing — surpassing Alibaba Group Holding Ltd.'s record as the largest US debut by a foreign company — will be deployed across multiple fronts: the first fab at the Yongin Semiconductor Cluster, the Cheongju P7T advanced packaging facility, and 11.9 trillion won in EUV lithography equipment scheduled for installation by the end of next year.

Micron is also investing 14 trillion won in a next-generation HBM production line in Hiroshima, Japan, reflecting the industry's collective bet that AI-driven demand will sustain the supercycle. Despite concerns from some analysts about a potential peak-out scenario, Counterpoint Research projects the average operating profit margin of the three major memory companies will reach 75 percent to 80 percent in the second quarter, anticipating the supply-driven boom will continue at least until 2027.

For investors, the supply outlook suggests sustained pricing power for memory makers through the decade. SK Hynix shares, trading at a discount to peers despite leading the HBM market, could see a valuation re-rating as the Nasdaq listing draws passive fund inflows from global asset managers and pension funds. The key risk is whether capacity expansion can eventually close the gap — or whether the shortage simply shifts to a different part of the supply chain.

This article is for informational purposes only and does not constitute investment advice.