The following is excerpted from the question-and-answer section of the transcript.
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Question: Hyunwoo Doh - NH Investment & Securities Co., Ltd., Research Division - Analyst
: [Interpreted]
My first question is on your DDR5. Your DDR5 seems to be more competitive in terms of product quality compared to your peers. How is this so
from the company's viewpoint? And also, what's the current profit margin difference of DDR5 over DDR4?
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APRIL 26, 2023 / 12:00AM, 000660.KS - Q1 2023 SK Hynix Inc Earnings Call
Secondly, I have also heard about the company's leadership very much in HBM. So could you provide more color on your business outlook for the
HBM segment? And also likewise in DDR5, how are you more competitive than your peers in HBM?
Unidentified Company Representative
[Interpreted] Thank you. First, on DDR5's competitive edge.
Okay. Back in 2018, we were the world's first to develop, successfully develop a 16-gigabit DDR5. And after that followed up with the 24-gigabit
DDR5 that sampled with customers in 2021. Then just last year, we delivered samples of a 6,400 megabit per second rated DDR5 modules again
as the world's first. So I would say that we have leadership in the development and the delivery to market of the DDR5 segment.
That allowed us to gain priority in securing the necessary module components and also to ensure product quality of the components that we
sourced that were necessary for these DDR5 modules. On top of that, we were able to work very closely in advance with our partners and customers
in verifying the reliability of these modules along the development process from very early on. So we believe this drove our competitive advantage
indeed in DDR5.
Then on product supply side, DDR5 crossover compared to DDR4 is expected for the server segment in Q2 '24 whereas we expect the timing of
bid crossover for DDR5 to the Q1 '24 for the PC segment. But internally, we are minding and working towards an even earlier time line to transition
to DDR5 in our DRAM lineup within the second half. So we believe that we are quite prepared and working with great focus to pursue our DDR5
leadership further.
Then on the margin difference of DDR5 over DDR4. Well, it would be difficult to compare apples-to-apples because the cost structure is very different
between DDR5 and D4 because DDR5 has many BOM cost, bill of material cost adders, minding that though, we are operating our market price to
minimize that gap that prevents DDR5 purchasing due to that cost difference.
Then on the HBM business outlook and our competitive edge. I could summarize our HBM advantage in 4 different points. One would be our stellar
performance of HBM products driven by robust designs. Secondly, industry-leading quality Thirdly, our proactive investment into HBM over the
years that ensured fast time-to-market and sufficient capacity. And then lastly, our strong collaboration with SoC or system on chip, chipset makers
across the world as well as cloud service providers who are our future customers in the HBM field.
More specifically on the performance side, we currently market an HBM3 that is rated at 5.6 gigabits per second in data rate, but we plan to sample
an 8 gigabit per second, HBM3E, in the second half of this year, targeting volume production ramp in the first half 2024.
On the quality side, the most crucial issue would be to prevent excessive heat that can be generated in the process of stacking these individual
HBM layers and connecting them using through silicon via interconnects. So from HBM2E onwards, we have used very unique and proprietary
technology in order to ensure the industry's best heat dissipation of quality for our HBM products.
On the capacity side, we are preparing HBM production capacity that is enough to support more than 50% annual growth going forward, and we
are translating this into actual business opportunity with our customers.
Finally, while the main HBM customers used to be chipset makers, that provide various system on chips, including AI or accelerator cards, we expect
cloud service providers to also become a major customer segment going into the future, so we are engaging in actual collaboration with the CSPs
already and believe this is a great opportunity to expand in the HBM segment going forward.
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