SK Hynix Plans $15 Billion Chip Expansion to Meet AI Demand

(Bloomberg) -- SK Hynix Inc. plans to spend about $14.6 billion building a new memory chip complex in South Korea, preparing to meet rapidly growing demand for semiconductors employed in AI development.

The Korean company intends to set aside an initial 5.3 trillion won to begin constructing a new factory towards the end of April, aiming for completion by November 2025. The total investment on the site will surpass 20 trillion won as SK Hynix fits it out with equipment over the long term, it said in a statement.

The envisioned outlay underscores a global race to supply the hardware and components essential to creating generative AI services around the world. SK Hynix, which reports quarterly results Thursday, is the current leader in a type of advanced chip called high-bandwidth memory tailored for AI. 

It’s fighting to sustain that advantage. SK Hynix for now is out-competing Samsung Electronics Co. to supply the so-called HBM chips, which work well with accelerators designed by Nvidia Corp. Samsung however has pledged to focus its formidable resources on catching up in high-end memory. 

SK Hynix in December became South Korea’s second-most valuable company, and its shares have gained another 27% this year as investors bet AI and a recovery in IT spending will catapult the market out of a years-long slump. This week, industry bellwether Texas Instruments Inc. delivered a bullish revenue forecast.

Related:Investors Bet Samsung's Memory Chip Rival SK Hynix Will Be an AI Winner

The Korean company is expanding ahead of that anticipated rebound. It foresees demand for HBM growing 60% annually in coming years, even as sales of regular DRAM climb alongside a proliferation of datacenters.

It plans to locate its newest plant close to its existing production base in Cheongju. The company’s also expanding in the US, with plans to spend $3.9 billion on an advanced packaging plant and research center for artificial intelligence products in Indiana. 

Separately, SK Hynix is proceeding with other domestic investments including in the Yongin Semiconductor Cluster, where it’ll inject about 120 trillion won over the long run. The company plans to start construction of the first fab in Yongin in March 2025 and complete it by May 2027. Since 2014, SK Hynix has invested 46 trillion won to build three new fabs in the country.