SK Hynix Goldman Sachs conference call: Unable to meet all customer demands, storage prices continue to rise this year.

In the resonance of the surge in demand for AI and the bottleneck in supply, storage chips are entering a "seller's market," with SK Hynix explicitly stating that the demand of all customers this year cannot be fully satisfied and price increases have become a certainty. At a virtual investor conference held on February 20, SK Hynix revealed the latest developments in the storage market to Goldman Sachs. Industry-wide shortage: Repeated ordering is futile, only driving prices up SK Hynix provided a very clear guidance on the price trend for this year: driven by strong demand from AI customers and limited supply growth, storage prices are expected to continue to rise throughout the year. The core logic behind this is the rigidity constraint on the supply side. SK Hynix pointed out that the industry as a whole is limited by the lack of clean room space, and supply growth is constrained physically. Regarding the market's concern about the "double-booking" risk, SK Hynix's view strikes at the heart: "The possibility of meaningful double-booking is very low. Customers are well aware that memory capacity cannot significantly increase in the short term. Therefore, they realize that double-booking will not bring more allocation, but will only further drive up prices." Although PC and mobile clients may respond with "despeccing," in the face of limited supply growth, this factor is completely offset. As AI customers make substantial progress in services, they are maintaining a huge investment scale, and this "real demand" has become the most solid support for price increases. Inventory at "extremely low levels," shifting bargaining power to sellers The current level of supply and demand tension has reached a high point in recent years. SK Hynix revealed a key fact at the conference: "No customer this year can fully meet their storage needs." This means that the demand fulfillment rates for all terminal markets are still low. From the inventory perspective, server customers' inventory has reached a healthy level, while PC and mobile customers' inventory is showing a downward trend. More importantly, as a supplier, SK Hynix's own inventory is extremely thin. "Our inventory for DRAM and NAND is at a normal level, around 4 weeks, and we expect this level to continue to decline throughout the year." The extremely low level of inventory means that the bargaining power of suppliers continues to strengthen. In this context, SK Hynix revealed that they are "discussing long-term contracts with major customers." Although the company's attitude is cautious, this marks a shift in the market structure from spot trading to a competition for long-term supply stability. HBM capacity sold out, shortage of standard DRAM becomes a new bargaining chip For the most anticipated HBM (High Bandwidth Memory) in the market, SK Hynix clearly stated that capacity allocation for 2026 is already a done deal. "All HBM capacity for 2026 has been sold out, and the production plan to meet customer demand has been allocated." SK Hynix admitted that given the current production plan, it is difficult to make meaningful adjustments to the production plans for HBM and standard DRAM in 2026. However, this deadlock brings good news for the future. Due to the extreme tight supply and demand situation for standard DRAM currently, this has given SK Hynix more leverage at the negotiating table. The company believes that this tight situation "may provide more favorable terms for the HBM business in 2027." In terms of process migration, SK Hynix's focus for this year is clear: the M15X plant will primarily focus on increasing 1b nm capacity to support HBM3E and HBM4. The more advanced 1c nm process will be primarily used for the large-scale migration of standard DRAM, with over half of standard DRAM expected to be on the 1c nm node by the end of the year, while the widespread adoption of 1c nm by HBM (mainly for HBM4E) will start in 2027. Capital expenditure: Disciplined, focused on high returns Despite facing a significant demand gap, SK Hynix remains clear-headed about capital expenditure (Capex). The company confirmed that this year's capital expenditure will exceed last year's, but emphasized that they will "continue to adhere to capital expenditure discipline." The investment priorities are very clear: a focus on HBM and standard DRAM. Although some investment has been restored to the NAND business (mainly for the migration to 321-layer 3D NAND), its proportion in total capital expenditure will remain stable (expected to be maintained in the low double-digit percentage range), without blind expansion. SK Hynix Goldman Sachs telephone conference full translation as follows: SK Hynix (000660.KS): Key Points of Virtual Meeting; Tight Supply and Demand of Memory Increase Bargaining Power and Potential Upside of HBM Date: February 20, 2026 | 3:38 PM (Korean Standard Time) Summary We held a virtual group meeting with SK Hynix (hereinafter referred to as "Hynix") and investors on February 20. The main conclusions include: Driven by actual demand and supply tightness, memory prices may continue to rise throughout the year. Healthy inventory levels and the increasing bargaining power of suppliers are prompting more discussions on long-term contracts. The current tight supply and demand for traditional DRAM may bring more favorable terms for the HBM (High Bandwidth Memory) business in 2027. The production capacity of 1c nm process in 2026 will mainly be used for traditional DRAM, while the main production capacity for HBM is expected to start from 2027. The guidance on capital expenditures (Capex) and focus on DRAM/HBM investment is generally consistent with Goldman Sachs forecasts (GSe). We reiterate our "Buy" rating for Hynix. (For more insights on the memory industry, please refer to our latest memory report.) Key Meeting Minutes 1. Driven by actual demand and supply tightness, memory prices may continue to rise throughout the year. Hynix believes that, driven by strong demand from AI customers, the current upward trend in memory prices may continue throughout the year. The company expects that as AI customers make substantial progress in AI services, they will continue to maintain a significant investment scale. Although the company acknowledges the potential pressure on memory demand from potential "despeccing" by PC and mobile clients, due to limited supply growth, the company still expects prices to continue to rise. The company mentioned that the limited clean room space in the industry is one of the reasons for the tight supply and favorable memory price environment. The company believes that the possibility of substantial "double-booking" of memory orders is low because customers are aware that memory capacity cannot significantly increase in the short term, so they realize that double-booking will not bring more quotas, but will only further increase prices. 2. Healthy inventory levels and increasing bargaining power of suppliers are prompting more discussions on long-term contracts. Hynix emphasizes that this year no customer can fully meet its memory needs, therefore the demand fulfillment rate for all terminal markets remains at a low level. As a result, Hynix believes that server customers' inventory levels are reaching a healthy state, while PC/mobile customers' inventory levels are declining. Considering the streamlined inventory on the supplier side (we believe that Hynix's normal inventory level for DRAM and NAND is about 4 weeks, and we expect this level to decline throughout the year), we believe that the bargaining power of suppliers will continue to strengthen. In this context, the company is discussing long-term contracts with major customers. Although discussions have made some progress, Hynix remains cautious overall, trying to maximize future demand stability. 3. The current tight supply and demand of traditional DRAM may bring more favorable terms for the HBM business in 2027. Although recognizing the potential upside in demand, Hynix mentioned that given that this year's HBM has been sold out and production allocated to meet customer demand, making substantive changes to the production plans between HBM and traditional DRAM in 2026 will be difficult. While the company may stick with its original capacity allocation plan for 2026, we believe that for 2027, the company's HBM business may have more upside, as we believe it may be able to reflect the significant supply and demand tightness of current traditional DRAM. 4. The production capacity of 1c nm in 2026 will mainly be used for traditional DRAM, with the main production capacity for HBM expected to start from 2027. Hynix will focus on increasing 1b nm DRAM capacity at the M15X plant this year, primarily to support the supply of HBM3E and HBM4. As the company plans to start using the 1c nm process for HBM4E, the large-scale production capacity ramp-up for HBM may be completed in 2027. At the same time, as the company expects strong demand for DDR5 and LPDDR5 (including SOCAMM) throughout the year, it may undergo a large-scale technology migration (rather than adding new wafer capacity) to increase its traditional DRAM supply at the 1c nm node, and we expect that by the end of the year, over half of traditional DRAM will be on the 1c nm node. 5. Capital expenditure guidance and focus on DRAM/HBM investments are generally consistent with Goldman Sachs forecasts. Although Hynix mentioned that this year's capital expenditure plan is still under discussion, the company continues to expect spending to increase compared to last year, while planning to continue adhering to capital expenditure discipline. The company expects this year's capital expenditure to be focused on the same mix of wafer fab equipment (WFE) as last year. While some NAND investments have been restored for the migration to 321-layer 3D NAND, the proportion of NAND capital expenditure is expected to remain stable as the focus of capital expenditure will remain on HBM and traditional DRAM. We believe the company's view on capital expenditure is generally consistent with our views, as we expect the company's total capital expenditure to increase by 36% year-on-year to reach 38 trillion Korean won, and we expect the proportion of NAND to remain in the low double-digit percentage range, similar to last year's figures. Target price, risks, and methodology Valuation method: Our 12-month target price based on the estimated average price-to-book ratio (P/B) for 2026/27 is 1,200,000 Korean won. We use 30% as an AI premium, which is the average premium Hynix has traded relative to Samsung Electronics (SEC) over the past year, as the former has shown significant growth in HBM revenue while the latter has limited growth in the same period. We apply this to peak multiples of 2.16 times during one of the strongest price increase cycles (2009-2010), to derive a target multiple of 2.8 times, from which we derive our target price. Key risks: Severe deterioration in memory supply and demand and delays in technology migration. Soft demand from smartphones/PCs/servers, which will affect overall traditional memory demand. Positive developments by Samsung in the HBM business, which may affect Hynix's HBM revenue and profits. Reduction in AI-related capital expenditure, which will affect overall HBM demand and therefore impact the company's HBM revenue/profits. Financial Summary (SK Hynix Inc.) Stock Code: 000660.KS Rating: Buy 12-Month Target Price: 1,200,000 Korean won Current Price: 894,000 Korean won (as of the close on February 19, 2026) Upside potential: 34.2% Market value: 63.12 trillion Korean won / 436.6 billion US dollars This text is reprinted from: "Wall Street See News"; GMTEight editor: Chen Xiaoyi.