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South Korea’s SK Hynix plans to invest $75 billion in AI and chip development by 2028.

ByYasmeeta Oon

Jul 1, 2024

South Korea’s SK Hynix plans to invest $75 billion in AI and chip development by 2028.

South Korea’s SK Hynix, the world’s second-largest memory chip maker, announced an ambitious plan to invest 103 trillion won (approximately $74.6 billion) by 2028. This substantial investment aims to strengthen its chips business, with a particular focus on artificial intelligence (AI). The announcement came from its parent company, SK Group, on Sunday.

SK Group, a sprawling conglomerate with more than 175 subsidiaries, also revealed its broader strategic goals during a two-day strategy meeting. The company plans to secure 80 trillion won by 2026 to invest in artificial intelligence and semiconductors, as well as to fund shareholder returns and streamline its extensive portfolio of subsidiaries. This move is seen as essential to reviving the group after significant losses in SK Hynix and the group’s electric vehicle battery division.

Key Investment Areas:

  • Artificial Intelligence (AI):
    • Development of high bandwidth memory (HBM) chips
    • AI data centers
    • AI services, including personalized AI assistants
  • Semiconductors:
    • Focus on advanced memory solutions
    • Expansion of production capacities

SK Group’s financial strategy includes a phased approach to streamline its subsidiaries to a “manageable range.” This move is aimed at enhancing efficiency and focusing on core competencies. The conglomerate expects its profit before tax to reach approximately 22 trillion won this year, a significant turnaround from last year’s losses. By 2026, SK Group aims to achieve a profit before tax of 40 trillion won.

YearInvestment in AI and Chips (Trillion Won)Expected Profit Before Tax (Trillion Won)

Key Points from the Strategy Meeting:

  • Streamlining Subsidiaries:
    • Gradual reduction in the number of subsidiaries
    • Focus on maintaining a manageable range
    • Increased efficiency and profitability
  • Mergers and Acquisitions:
    • Local media reports suggest a potential merger between SK Innovation and SK E&S
    • Aim to consolidate profitable operations and enhance overall performance

SK Group’s Chairman, Chey Tae-won, emphasized the need for “preemptive and fundamental change” to navigate the current market transitions. This strategic overhaul is seen as crucial for improving SK Group’s competitiveness, particularly in its AI value chain. By focusing on advanced technologies like high bandwidth memory (HBM) chips and AI data centers, SK Hynix aims to solidify its position in the global semiconductor market.

South Korea, home to the world’s top memory chip makers Samsung Electronics and SK Hynix, has faced challenges in areas such as chip design and contract chip manufacturing. To address these issues, the South Korean government earlier this year announced a 26 trillion won ($19 billion) support package for its chip businesses. This package is intended to enhance the country’s capabilities in chip design and contract manufacturing amid intense global competition.

Government Support Package Highlights:

  • Financial Aid:
    • 26 trillion won ($19 billion) allocated for chip businesses
    • Focus on maintaining competitive edge in chip design and manufacturing
  • Strategic Goals:
    • Ensure South Korea keeps pace with global semiconductor leaders
    • Strengthen domestic chip manufacturing infrastructure

Despite the substantial investment and strategic planning, SK Group and SK Hynix face several challenges. The global semiconductor market is highly competitive, with significant investments required to stay ahead. Moreover, the ongoing geopolitical tensions and supply chain disruptions pose additional risks.

However, the group’s focus on AI and advanced memory solutions positions it well for future growth. The development of HBM chips and AI services aligns with the increasing demand for high-performance computing and data processing capabilities. Furthermore, the expected recovery in profitability and strategic mergers could bolster SK Group’s market position.

  • Investment:
    • 103 trillion won in AI and chips by 2028
    • 80 trillion won by 2026 for AI, semiconductors, and shareholder returns
  • Profit Targets:
    • 22 trillion won profit before tax in 2023
    • 40 trillion won profit before tax by 2026
  • Streamlining Efforts:
    • Gradual reduction in subsidiaries
    • Potential mergers to consolidate profitable operations
  • Government Support:
    • 26 trillion won support package for chip businesses

SK Group’s substantial investment in SK Hynix and its broader strategic initiatives underscore the conglomerate’s commitment to enhancing its competitiveness in the global semiconductor market. By focusing on AI and advanced memory solutions, SK Hynix aims to navigate the challenges and seize the opportunities in the rapidly evolving tech landscape. The group’s strategic efforts, combined with government support, position it well for sustained growth and profitability in the coming years.

Featured Image courtesy of Nikkei Asia

Yasmeeta Oon

Just a girl trying to break into the world of journalism, constantly on the hunt for the next big story to share.

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