SK Hynix approved a $38.1 billion investment in chip manufacturing capacity across two South Korean facilities through 2031, the company announced. The board approved the spending for a DRAM fab in Yongin and a NAND flash fab in Cheongju on August 7.
The investment represents one of the largest capital commitments by a memory chip maker in recent years. SK Hynix is the world's second-largest DRAM supplier and third-largest NAND producer by market share. The company is competing with Samsung Electronics and Micron Technology for control of memory chip supplies serving data centers, personal computers and smartphones.
The Yongin facility, called the Y2 DRAM fab, and the Cheongju site, called the M17 NAND fab, will expand the company's footprint in South Korea at a time when global semiconductor capacity is constrained. SK Hynix currently operates multiple fabs across South Korea, China and the United States. The new facilities are expected to add production volume in the coming years as demand from artificial intelligence applications and cloud computing continues to rise.
Memory chip pricing has recovered from lows in 2023 after years of oversupply and price declines. DRAM prices rose 18 percent in the second quarter of 2024 compared to the year prior, according to industry tracking firms. NAND flash prices also recovered but remain volatile.
South Korea has positioned itself as a critical hub for semiconductor manufacturing. The government offers tax incentives and support for major chip investments. Samsung Electronics and SK Hynix together control roughly 70 percent of global DRAM production capacity. The two companies have announced multiple expansion projects in recent years to capture demand from AI and cloud infrastructure buildouts.
SK Hynix is spending roughly $5.4 billion per year on average across the five-year investment period. The company's total capital expenditures in 2023 were $7.9 billion. The five-year commitment is 3.4 times the company's 2023 annual capex.
Memory chip producers have historically cycled between periods of investment during price spikes and retrenchment during downturns. SK Hynix is committing $38 billion at a time when prices have recovered only partially from the 2023 trough. The company would face losses if DRAM and NAND prices fall sharply before new fab capacity reaches full output in the 2030s.
