HBM shortages deepen, supporting continued pricing resilience at SK Hynix

Overview

This report is Bernstein's company deep dive on SK Hynix 000660.KS, focusing on 1Q26 results, the HBM supply-demand landscape, DRAM and NAND pricing trends, capital expenditure, and shareholder returns. The conclusion is constructive, with the firm believing the pricing outlook should remain solid over the next few quarters and maintaining its Outperform rating.

Core views

The core view is that pricing strength in the memory cycle may last longer than the market had initially expected. SK Hynix management believes the current shortage is structural, customers are more focused on securing supply than on pushing prices lower, and HBM demand will significantly exceed supply over the next three years, supporting the company's bargaining power in high-end DRAM. On the NAND side, pricing and margin performance are also stronger than expected, and the transition to 321L should increase capacity.

Analysis framework

The report mainly analyzes the company using 1Q26 results, the 28-day market consensus, company guidance, product-level ASP and bit shipment trends, DRAM and NAND margins, the pace of capex, peer comparison with Micron, and valuation metrics.

Methodology notes

• Earnings comparisonComparison of company actual results versus 28-day consensus

  Judge whether results beat expectations by comparing revenue, earnings, and key operating metrics with the latest consensus.

  The report believes SK Hynix's 1Q26 results were broadly in line with the latest 28-day consensus, but earnings beat expectations thanks to KIOXIA investment revaluation gains.

• Supply-demand analysisAssessment of structural HBM shortages

  Use the gap between future demand and available supply to assess the persistence of product pricing and margins.

  The report cites the company's view that HBM demand will far exceed supply over the next three years, and that customers prioritize supply security, which supports continued strong pricing.

• Peer comparisonQuarterly metric comparison between SK Hynix and Micron

  Compare ASP, shipments, and revenue trends with peers to determine whether performance reflects industry-wide dynamics or relative advantage.

  The report notes that 1Q26 ASP growth was similar to Micron's, especially with DRAM pricing outperforming expectations.

• Valuation analysisForward price-to-book and target price framework

  Assess whether valuation is reasonable by combining cycle earnings, the balance sheet, and forward price-to-book.

  The report believes SK Hynix's current valuation is reasonable, while the target price is KRW 1,150,000.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• SK Hynix 000660.KS

  Research subject

  Strengths

  Tight HBM supply-demand balance, strong DRAM pricing, improving NAND margins, and capex focused on strategic tools and infrastructure.

  Weaknesses

  The target price is below the report's stated closing price, so short-term implied upside is negative; rising capex could pressure free cash flow.

  Comparison

  The report compares some ASP and revenue trends with Micron and says 1Q26 ASP growth was similar to Micron's.

  Risks

  HBM customer demand or ramp timing may come in below expectations, spot prices may weaken from temporary softness into a cyclical turning point, and capex returns may fall short of expectations.

• Micron Technology Inc. US.MU

  Peer comparison object

  Strengths

  Serves as the benchmark for ASP, bit shipment, and revenue comparisons in the NAND and DRAM charts.

  Weaknesses

  The report does not assign Micron an independent investment rating or a detailed risk-reward view.

  Comparison

  SK Hynix's 1Q26 ASP growth is described as very similar to Micron's.

  Risks

  Peer data is used only for comparison and cannot be used directly to infer an investment conclusion on Micron.

• HBM

  Core product driver

  Strengths

  Demand over the next three years is expected to far exceed supply, with customers prioritizing supply lock-in, supporting high-end DRAM revenue and margins.

  Weaknesses

  Capacity allocation must be balanced between HBM and conventional DRAM.

  Comparison

  Graphics DRAM revenue is mainly driven by HBM, with moderate quarter-on-quarter growth in 1Q26 that exceeded expectations.

  Risks

  There is uncertainty around HBM4 and HBM4E mass-production timing, customer qualification, and the pricing path.

• DRAM

  Main business segment

  Strengths

  1Q26 ASP growth was stronger than expected, and gross margin rose to the low-to-mid 80s.

  Weaknesses

  Conventional DRAM still has to compete with HBM for capacity allocation.

  Comparison

  The report says DRAM revenue increased significantly in 1Q26, driven by mid-cycle ASP growth of more than 60%.

  Risks

  If supply expands too quickly or demand slows, pricing strength could ease.

• NAND

  Main business segment

  Strengths

  Pricing and margin resilience were better than expected, gross margin may exceed 60%, and the 321L migration should support capacity expansion.

  Weaknesses

  NAND pricing has historically been volatile, and supply recovery could change the pricing environment.

  Comparison

  The report shows NAND ASP, bit shipment, and revenue trends for Samsung, SK Hynix, Micron, SanDisk, and others.

  Risks

  If spot price weakness persists, it could weaken improvements in revenue and margins.

Key data

• Report ratingOutperformThe report explicitly states that it maintains an Outperform rating.
• Target priceKRW 1,150,000Target price shown on page 6 of the report.
• Closing priceKRW 1,220,000As of April 22, 2026.
• Implied upside-6%Shown in the report table as upside/downside of (6)%.
• Market capKRW 869,496.89 billionShown in the report table.
• Enterprise valueKRW 859,463.05 billionShown in the report table.
• Dividend yield0.2%Shown in the report table.
• DRAM gross marginLow-to-mid 80sThe chart text says DRAM gross margin rose to the low-to-mid 80s.
• NAND gross marginMay also exceed 60%The chart text says NAND gross margin may also exceed 60%.
• NAND technology migration50% of domestic capacity shifted to 321L by end-2026The report says the technology upgrade could bring a significant increase in NAND capacity.

Impact & implications

If HBM shortages and memory pricing resilience continue, SK Hynix's profitability may remain elevated, and capex will continue to tilt toward HBM, advanced DRAM, NAND technology upgrades, and infrastructure. For investors, the key issue is not short-term spot price volatility, but whether the supply-demand gap in high-end memory is large enough to support a longer upcycle.

Risks

• A slowdown in memory spot prices may not be temporary, but instead a signal that the cycle has peaked.
• There is execution uncertainty around HBM4 and HBM4E customer qualification, sample testing, and mass-production timing.
• A significant increase in 2026 capex could create cash flow pressure.
• If industry supply expands faster than demand, DRAM and NAND pricing resilience may weaken.
• The target price is below the report's stated current price, creating apparent tension between short-term risk-reward and the Outperform rating.

What to watch

• Whether the rebound in 2Q26 DRAM and NAND shipments matches company guidance.
• HBM orders, customer production schedules, and the HBM4/HBM4E mass-production timetable.
• Whether DRAM and NAND ASP continue to outperform market expectations.
• Details of 2026 capex, progress on the Yongin Y1 project, and spending on strategic tools.
• The pace of 321L NAND capacity migration and its impact on capacity and cost.
• Dividend and buyback plans, as well as SEC review progress on the ADR issuance.