The global memory market is dividing into two main segments, with South Korea’s SK Hynix playing a major role. The company has shifted from being a traditional semiconductor maker to a leading force behind the AI infrastructure surge.

SK Hynix has invested billions in advanced packaging technologies, gaining a leading share of the high bandwidth memory (HBM) market and changing the industry’s usual economic patterns. 

Instead of the typical cycles based on consumer demand, the market now faces ongoing shortages due to infrastructure needs, which is reshaping the global supply chain.

Technical hegemony by advanced packaging

SK Hynix’s rise was not just due to advances in lithography and production, but also to its expertise in chip stacking. As generative AI models needed more data throughput, HBM became a key bottleneck for AI accelerators such as Nvidia’s Blackwell architecture.

SK Hynix showed strategic foresight by investing early in mass reflow molded underfill (MR-MUF) packaging technology. This helped the company overcome the thermal and physical challenges that held back its larger competitor, Samsung Electronics.

The industry’s previous standard, thermal compression with non-conductive film (TC-NCF), faced severe yield issues as layer counts increased to 12 and 16 dies. The non-conductive film often acted as a thermal insulator, trapping heat and causing ultra-thin dies to warp under high bonding pressure.

SK Hynix took a different approach by using a liquid epoxy molding compound with about twice the thermal conductivity of traditional films. This gave the company a technical advantage, letting it reliably produce 12-high HBM3E modules while competitors struggled with delays. By early 2026, SK Hynix controlled over 60% of the premium HBM market.

The $13 billion Cheongju fortress

To solidify this leadership, SK Hynix recently announced a massive capital injection to strengthen its lead. It would invest 19 trillion won (about $13 billion) in a new facility in Cheongju, South Korea. Called P&T7 (Package & Test 7), and due to be completed by the end of 2027, this project marks a major shift from front-end fabrication to back-end integration, the complex vertical stacking and logic integration required for next-generation HBM4 and HBM4E products.

P&T7 is important because it creates what SK Hynix calls an “organic link” between its manufacturing stages. The facility is right next to the M15X fab, a large HBM plant where equipment installation started in early 2026. In HBM manufacturing, where 12 to 16 fragile dies are stacked together, logistics play a key role in achieving high yield.

By building the packaging plant next to the wafer fab, SK Hynix uses automated systems to move wafers directly from production to stacking, reducing the risk of damage from long-distance transport. This setup also allows quick feedback, so any defects found during packaging can be addressed in real time.

SK Hynix Cheongju semiconductor cluster integration

Source: Company reports and news

Capacity penalty and zero-sum wafer game

Focusing on HBM has led to a major side effect: reduced standard memory production. HBM manufacturing is less efficient with wafers, facing what analysts call a “capacity penalty” of 1:3. For each HBM wafer used, the industry loses the output of three standard DDR5 wafers due to larger die sizes, extra logic, and lower yields from stacking.

Since HBM brings in gross margins of 60% to 70%, SK Hynix and its competitors are shifting cleanroom space and investment toward these AI-focused products. This change has caused a sharp shortage of standard server and PC components.

By early 2026, many distributors had almost no standard DDR5 modules left, and spot prices were expected to jump by 60% to 70%. At the same time, the move to high-capacity enterprise SSDs (eSSDs) for AI “Data Lakes” has pushed standard storage lead times from 8 weeks up to 20 weeks.

Era of scarcity

In the past, the semiconductor industry has gone through wild “boom-and-bust” cycles, where companies built too much capacity during good times, causing prices to crash later. “At the peak of every cycle, they always claim: this time is different. And then at the bottom… they lose a lot,” said Paul Meeks, managing director at Freedom Capital Markets. However, recent data shows this pattern may be changing.

Unlike earlier cycles driven by consumer electronics, today’s supercycle is fueled by large, long-term investments from companies and governments in AI infrastructure.

SK Hynix has said that all of its HBM production for 2026 is already “sold out” thanks to firm customer commitments. This kind of advance visibility is rare in a market that usually changes every quarter.

By the third quarter of 2025, SK Hynix reached a 47% operating margin and earned over $6.9 billion in operating profit for the first time. The company also moved to a net cash position of $2.6 billion, showing the financial strength gained from these changes.

As the industry shifts to 16-layer HBM4 products, the need for logic dies made on advanced nodes has led to new partnerships, such as the one between SK Hynix and TSMC.

“As innovation triggered by AI accelerates further, customers’ technical requirements are evolving rapidly,” argued Justin Kim, president and head of AI Infra at SK Hynix during CES 2026. “We will meet customer needs with differentiated memory solutions.” The company is now more than just a supplier of memory chips; it is a “full-stack AI memory provider” that is part of the design of the world’s most advanced computing systems.

Burden of leadership and market dynamics

Even with its strong lead, SK Hynix faces significant challenges in 2026 as it shifts from market dominance to defending its position. The company has to deal with “intensifying competition” in the AI era and the “potential profitability decline with the introduction of HBM4 due to greater cost increases” compared to earlier products.

The main economic challenge for SK Hynix in 2026 is the possible drop in the “AI premium.” Even though demand is still very high, new competitors are starting to change prices. Analysts at Mirae Asset Securities expect HBM bit shipments to grow by 16% in 2026, but the average selling price (ASP) for HBM products could fall by about 7.4% compared to the previous year.

“While we take pride in our position as an industry leader and use it as a positive driving force,” CEO Kwak Noh-Jung emphasized in his 2026 New Year message, “we must never lose the mindset of a challenger,” requiring SK Hynix to retain its identity to survive the very supercycle it helped create.

This year milestone for sustainable profit

2026 is set to be a milestone year for SK Hynix as it works to keep up its record results by carefully managing capital spending. The company’s “Value Up” plan says the annual investment should stay around the mid-30% of revenue range to keep cash flow steady while meeting strong demand.

SK Hynix expects revenue to reach $86 billion in 2026, a 37.9% increase from the previous year. The company is using its strong position to boost shareholder returns, including raising its fixed dividend by 25%.

The Cheongju facility improves logistics, but SK Hynix still faces “geopolitical and macroeconomic uncertainties,” especially with U.S. export controls that affect its business in China. Also, the split in the memory market means the company depends on AI premiums, while growth in smartphones and PCs remains modest.

In the end, SK Hynix’s rise shows a bigger shift in the digital economy. The time of cheap, plentiful memory is over, replaced by a zero-sum game where getting enough silicon is now the main limit on tech progress.

Author’s note: This article is based on publicly available information and does not constitute financial or investment advice. An exchange rate of 1450 Korean Won to US$1 has been used.