[R&E] SK Hynix Posts 37.6 Trillion Won in Q1 Operating Profit... Massive Shift in Memory Supply and Demand Lifts the Korean Stock Market

[R&E: Research & Epoch] This is News Epoch's signature report, which provides a perspective on the new era of investment through comprehensive analysis of global financial data and domestic securities firm research.

Global Market Brief

The New York stock market closed mixed the previous day. The S&P 500 fell 0.41% to 7,108.40 points, and the Nasdaq closed at 24,438.50 points, down 0.89%. In contrast, the Philadelphia Semiconductor Index rose 1.71% to record 10,078.57 points. Intel (NASDAQ: INTC) surging 18.7% in after-hours trading following its earnings announcement led the rise in the semiconductor sector. Texas Instruments (NASDAQ: TXN) also jumped 19.43%, proving the effect of a 90% increase in data center-bound sales.

The U.S. S&P Manufacturing PMI for April recorded 54.0, exceeding the market expectation of 52.5, suggesting that the manufacturing recovery is accelerating. However, initial jobless claims came in at 214,000, surpassing expectations and revealing cracks in the labor market. The yield on the U.S. 10-year Treasury note rose to 4.324%, putting upward pressure on the domestic bond market as well.

Domestic Market Overview

The domestic stock market closed higher as the Q1 GDP growth rate exceeded market expectations. The KOSPI rose 0.90% to 6,475.81 points, while the KOSDAQ fell 0.58% to 1,174.31 points. Q1 GDP grew by 1.7% quarter-on-quarter, significantly beating the market expectation of 0.9%, which drove investment sentiment. It is particularly notable that facility investment increased by 4.8% amid a synchronized recovery in both the manufacturing and construction sectors.

The won/dollar exchange rate fell 0.4 won to 1,480.0 won. The Korean won's relative strength, even as the dollar index rose to 98.8 points, is analyzed to be the result of the GDP surprise effect. Although the yields on 3-year and 10-year Korea Treasury bonds rose by 9.6 bp and 9.5 bp respectively, synchronizing with the U.S. interest rate hike, capital inflows into the stock market are expected to continue due to improving economic fundamentals.

Key Industry Issues and Insights

SK Hynix (KRX: 000660) starkly demonstrated the amplitude of the memory upcycle. The Q1 operating profit of 37.6 trillion won represents a 96.2% increase from the previous quarter, with the operating profit margin soaring to 71.5%. The key drivers were a 64% quarter-on-quarter increase in DRAM prices and a 65% rise in NAND prices. The sales proportion of HBM accounted for 23%, directly benefiting from the AI semiconductor boom.

The outlook for the second quarter is even more positive. With DRAM prices expected to rise by an additional 45%, Q2 operating profit is estimated to reach 65 trillion won. This is a 610.9% increase compared to the same period last year, proving that the memory upcycle has fully gotten on track. Analysis indicating that memory supply shortages will intensify until 2027 also supports the price increase.

The earnings improvement of semiconductor equipment stocks is also evident. DI Corporation (KRX: 003160)'s Q1 operating profit is estimated at 13.2 billion won, surging 204.8% from the previous quarter, which is evidence of expanding semiconductor facility investments. Considering that the global semiconductor equipment spending forecast has been revised upward to $140 billion, it is certain that domestic equipment companies will begin to benefit in earnest.

The automotive sector showed a contrasting trend. Hyundai Motor (KRX: 005380)'s Q1 operating profit was 2.51 trillion won, down 30.8% year-on-year. It incurred a loss of 860 billion won due to the impact of U.S. export tariffs, and took on an additional burden of 200 billion won due to rising raw material prices caused by Middle East conflicts. Its cost of sales ratio recorded 82.5%, up 2.7 percentage points year-on-year, highlighting deteriorating profitability.

However, the structural changes are positive. The global hybrid proportion hit an all-time high of 17.8%, rising notably to 24.8% in the U.S. market. This is evaluated as the hybrid strategy working effectively as a countermeasure during the electrification transition period.

LG Innotek (KRX: 011070) is expected to see a 126% increase in Q1 operating profit to 282.7 billion won, driven by a recovery in its optical solutions division. The fact that the operating profit margin of its substrate business is expected to improve from 4.8% last year to 11.2% this year demonstrates the benefits of the trend toward higher-specification components.

In the financial sector, Shinhan Financial Group (KRX: 055550) exceeded market expectations with a Q1 net profit of 1.62 trillion won, while NH Investment & Securities (KRX: 005940) also saw its controlling shareholder net profit surpass the consensus by 20.7%. It appears that the recovery in financial sector earnings is accompanying the improvement in economic growth rates.

Market Signals

• Memory Prices: SK Hynix DRAM prices up 64% quarter-on-quarter, NAND prices up 65%

• GDP Surprise: South Korea's Q1 GDP growth rate at 1.7% (massively outperforming market expectation of 0.9%)

• Oil Price Rise: WTI at $95.9 (+3.1%), Brent crude topping $105, reigniting inflation concerns

• Semiconductor Facility Investment: 2026 global semiconductor equipment spending forecast revised upward to $140 billion

• Exchange Rate Stability: Won/dollar at 1,480.0 won (-0.4 won), indicating a stronger won driven by strong GDP

Epoch View: Investment Implications

SK Hynix's 37.6 trillion won operating profit goes beyond a simple earnings beat. It is a signal that the memory industry is passing through a structural inflection point in tandem with the AI revolution. The simultaneous rise in DRAM and NAND prices signifies demand diversification. Omnidirectional demand is exploding, expanding beyond PC and server memory to HBM for AI accelerators and automotive memory.

The core issue is constraints on the supply side. The forecast that memory supply shortages will intensify until 2027 suggests that the price increase is not a temporary phenomenon. Although semiconductor equipment investment is increasing, considering the time lag until actual mass production, this supply gap is judged to become a golden time for memory companies.

From the perspective of the domestic stock market, the structure of the semiconductor upcycle driving the KOSPI's rise is solidifying. With the GDP growth rate also exceeding expectations, a scenario where macroeconomic fundamentals and the semiconductor supercycle operate simultaneously is materializing. A new formula for 2026 is being established, where memory hegemony translates into Korean stock market hegemony.

This content was generated through News Epoch's proprietary AI algorithm, which analyzes public data from major domestic securities firm research centers and global financial media in real-time. It is an objective summary based on collected data and does not constitute a solicitation or recommendation to invest in specific stocks.