SK Hynix has approved investments of 54.3 trillion won ($38.3 billion) through 2031 to expand semiconductor manufacturing capacity, targeting rising AI-driven demand. The company's board approved 35.2 trillion won for the second phase of construction at its semiconductor fabrication complex in Yongin and 19.1 trillion won for the M17 chip plant in Cheongju. This follows SK Hynix's announcement in June that it planned to invest 600 trillion won in the Yongin semiconductor cluster and 100 trillion won to expand production facilities in Cheongju. The investment approval comes as the company ramps up production of advanced memory chips to meet growing demand driven by artificial intelligence applications, with the memory chip market facing a supply shortage amid rapidly rising demand from companies building AI infrastructure.
The Y2 fabrication plant in Yongin will be the second of four planned chip fabrication facilities within the semiconductor cluster, with construction expected to begin in July 2027 and its first cleanroom scheduled to become operational in June 2029. The facility will primarily manufacture dynamic random access memory (DRAM) chips, which play a crucial role in servers supporting AI workloads. The plant will manufacture high-bandwidth memory (HBM) and other next-generation DRAM products, strengthening SK Hynix's position in the rapidly expanding AI memory market. The company also confirmed that development of the first-phase Yongin fabrication plant remains on schedule, with its first cleanroom expected to open in February 2027. SK Hynix's investment in Yongin therefore gives the company additional capacity to support the growing demand for advanced memory products used in AI applications.
SK Hynix announced that construction of the M17 fabrication plant in Cheongju is scheduled to begin in February 2027, with the facility producing NAND flash memory widely used for data storage across devices including personal computers, smartphones and AI servers. The first cleanroom at the M17 plant is expected to become operational in December 2028. This Cheongju expansion is aimed at strengthening the company's production capacity across both DRAM and NAND memory segments as demand for advanced semiconductor components continues to rise. The different production focus of the two facilities gives SK Hynix an opportunity to expand capacity across key segments of the memory market, while Yongin Y2 will focus on DRAM and next-generation HBM products, M17 will manufacture NAND memory. The company also plans additional shareholder return measures, with details expected during the third quarter.
The investment decision comes as SK Hynix faces stronger competition from Samsung, with Counterpoint Research data showing Samsung regained the top position in the DRAM market by share in the second quarter, adding pressure on SK Hynix to expand its production footprint. Despite the record-shattering performance, SK Hynix's ADRs have faced volatility along with other chip stocks, with the receipts settling 0.84% lower at $142.32 on Thursday. The supply-demand imbalance has also pushed memory prices higher, benefiting major memory manufacturers including SK Hynix, Samsung and Micron, with their stocks rallying as investors expect tight supply conditions to continue. The company delivered exceptional second-quarter results with operating income of $42 billion, representing a 557% increase from the year-ago period, while revenue climbed 257% year-over-year to $54.6 billion.
Samsung and SK Hynix are set to hold a combined $263 billion in net cash by year-end, more than double the estimated $102 billion of AI bellwether Nvidia and exceeding the combined cash of the other six "Magnificent Seven" U.S. technology companies. The memory chip makers are generating cash at an unprecedented pace due to robust demand for chips used in AI applications, amassing reserves that exceed those of U.S. tech giants that are spending heavily on AI infrastructure. At present, both Samsung and SK Hynix target shareholder returns equivalent to half of free cash flow. In June, U.S. chipmaker Micron pledged to return 100%, while portfolio manager Richard Clode at Janus Henderson Investors stated that sticking to around a 50% free cash flow return would result in an incredibly inefficient balance sheet.
