Earnings Call: Q2 2021

Jul 27, 2021

안녕하십니까? SK hynix IR 담당 박성환입니다. 2021년 2분기 경영실적 콘퍼런스 콜에 참여해 주신 모든 분들께 감사드립니다. Good morning, and good afternoon and evening to those calling in from abroad. This is Park Seong Hwan, the head of IR at SK hynix. Welcome to the SK hynix 2021 second quarter earnings release conference call. 오늘 참석한 회사 측 임원들을 소개해 드리겠습니다. 노종원 경영지원 담당, 장혁준 재무 담당, 박명수 D램 마케팅 담당, 박찬동 NAND 마케팅 담당이 함께하고 있습니다. Before starting the conference call, allow me to introduce the executives present here with me today. First, Kevin Noh, CFO and Head of Corporate Center, Jang Hyeok Jun, Head of Finance, Park Myoung-Soo, in charge of DRAM Marketing, and Park Chan-dong, in charge of NAND Marketing. 콘퍼런스 콜 발표 내용에 포함된 예측 정보는 거시경제 및 시장 상황 등의 변화에 따라 달라질 수 있으므로 유의하시기 바랍니다. Let me issue a disclaimer that all outlooks presented by the company are subject to change depending on the macroeconomic and market circumstances. 그럼 지금부터 SK hynix 2021년 2분기 경영실적 발표를 시작하도록 하겠습니다. 먼저 노종원 경영지원 담당이 2분기 실적과 시장 전망, 그리고 향후 계획에 대해 설명드린 후 참석 경영진과 함께 Q&A 세션을 갖도록 하겠습니다. With that, we will now begin SK hynix 2021 second quarter earnings release conference call. Kevin will first present the earnings for the second quarter and the company's plan. It will then be followed by a Q&A session with the executives present here today. 안녕하십니까? 경영지원 담당 노종원입니다. 먼저 2분기 실적에 대해서 말씀드리겠습니다. Good morning, everyone. This is Kevin Noh, CFO and Head of Corporate Center. I will first brief you on the company's financial performance in the second quarter of 2021. 2분기 메모리 시황은 PC, 그래픽, 컨슈머 향 제품의 견조한 수요에 더해서 전분기 대비 서버 향 제품의 수요 회복세가 맞물리면서 빠르게 개선되었습니다. Memory market in the second quarter showed rapid improvement thanks to solid demand for PC, graphics and consumer products, as well as recovery in the demand for server products compared to the previous quarter. 이렇게 증가하는 수요 대응을 위해 DRAM과 NAND 출하량은 기존 가이던스를 소폭 상회하여 전분기 대비 각각 한 자릿수 중반과 한 자릿수 초반대의 증가율을 기록하였습니다. ASP 또한 DRAM과 NAND 전 응용 제품의 가격이 상승하면서 각각 10% 후반대와 약 10%의 상승률을 기록하였습니다. To respond to the growing demand, bit shipment increased by mid single digit % and low single digit % for DRAM and NAND respectively, slightly outperforming the guidance. ASP also grew by a high 10% and approximately 10% in DRAM and NAND respectively, rising across all applications. DRAM의 전분기 대비 매출이 20%대 후반으로 큰 폭 성장하는 가운데, MCP는 중화권 모바일 고객들의 제품 고사양화로 DRAM 8GB와 NAND 256GB 이상의 고용량 제품 판매 증가로 매출은 전분기 대비 11% 증가하였으며, 매출 비중은 전분기 대비 소폭 줄어드는 모습을 보이고 있습니다. With DRAM sales growing significantly by high 20% QOQ, MCP sales also grew on the back of stronger sales of high-density products, such as DRAM 8GB and NAND 256GB or higher, with higher specifications for mobile products in the Greater China region. Revenue increased by 11% quarter-on-quarter. The portion out of sales fell slightly from the previous quarter. 이에 당사 2분기 매출은 10.32조 원으로 전분기 대비 22%, 전년 동기 대비로는 20% 증가하였습니다. 이는 메모리 초호황기였던 2018년 2분기와 3분기 이후 3년 만에 다시 분기 매출 10조 원 이상을 달성했다는 측면에서 의미가 있다고 보여집니다. This brings the company's consolidated sales in the 2nd quarter to KRW 10.32 trillion, up 22% QoQ and up 20% YoY. This is meaningful in that quarterly sales topped KRW 10 trillion again for the first time in 3 years since the 2nd and 3rd quarters of 2018, when the memory market was in a super cycle. 한편, 2분기 중 연초에 오픈한 M16 팹의 초기 가동 비용이 발생하고, 올해 임금 인상분 적용과 우리 사주 지급 등으로 인한 인건비가 상승하여 매출 원가와 판매 관리비는 전분기 대비 각각 4%와 17% 증가하였습니다. Cost of goods sold and SG&A went up by 4% and 17% respectively. There were initial startup costs for the M16 fab, which opened early this year, as well as the annual increase in payroll applied retrospectively and payout of the ESOP. Despite increase in expenses, there was still a slight reduction in unit cost QOQ for both DRAM and NAND, thanks to the growth in sales portion of DRAM 1ynm and 1znm, as well as the 128-layer NAND. Operating profit in the second quarter was KRW 2.69 trillion, up 103% QOQ. Operating profit margin was 26%, higher by 11 percentage points QOQ. Depreciation and amortization in the second quarter was KRW 2.62 trillion, slightly increased from the previous quarter. EBITDA was KRW 5.31 trillion, with EBITDA margin of 51%. There was a net non-operating income of KRW 106.5 billion. There was net interest expense of KRW 63.4 billion, net foreign currency-related gain of KRW 42.2 billion. There was also gain on equity method valuation of KRW 125.5 billion from the building sell-off by SK China, where the company has some equity ownership. Net profit before tax was KRW 2.8 trillion, corporate tax expense was KRW 0.81 trillion. Net profit was KRW 1.99 trillion with a net profit margin of 19%. Consolidated cash balance at the end of Q2 was KRW 6.64 trillion, up by KRW 0.65 trillion from the previous quarter. Interest-bearing debt was KRW 13.85 trillion, increased by KRW 0.25 trillion QOQ. The company's debt-to-equity ratio and net debt-to-equity ratio stood at 25% and 13% respectively, slightly improved from the previous quarter. Next is the company's market outlook and plan. The memory market in the first half improved more swiftly than expected. DRAM demand growth exceeded the projected 20%, despite the shortage of some parts, and is now expected to be in the low 20%. Demand growth was likewise robust for NAND, which was initially expected to improve in the second half of the year, with prices turning around to a steep increase in the second quarter. Annual demand growth is also projected to be higher than initially thought, to be in the mid to high 30%. Breaking down the demand environment by application, the PC market is expected to see over 10% shipment growth for the second year in a row. Following the PC demand for educational PCs, it will be enterprise PCs that will drive demand in the second half. The mobile market initially anticipated to recover quickly with the accelerated transition to 5G and high pent-up demand, was slow due to another surge in COVID-19 in some regions, as well as some component shortages. Demand is likely to recover in the second half, as COVID is coming under control in major markets, including India, and smartphone demand is recovering in the Greater China region. Plans for new product launches and seasonality will further drive demand. As for the memory content per box, there is accelerated growth in demand for high memory density, like 8 gigabyte DRAM and 256 gigabyte NAND, thanks to the ongoing penetration of 5G models and the growth in high-end markets. Especially mobile phones that adopt 12 gigabyte DRAM and 256 gigabyte NAND are expected to be introduced in the market in the second half, which will further drive the mobile memory demand. In the server market, demand from hyperscale customers began to improve from the 2nd quarter with growing investment in new data centers. Solid growth in demand is expected into the 2nd half with the newly launched CPU driving replacement demand and corporate IT spending also picking up. The improved performance by the new CPU will also drive up the memory content per box, likely to increase demand in the 2nd half for high-density server DRAM modules of 64 gigabytes or higher. Given such market environment, the memory market in the 2nd half will continue to see favorable trends, to be further aided by seasonality that will start in the 3rd quarter. For NAND, in particular, improvement in the supply-demand dynamics will accelerate thanks to launch of new high-density mobile products and strong demand for Enterprise SSD. With the stronger-than-expected demand continuing this year, memory suppliers are utilizing their inventory as much as possible. DDR5 products are set to go into production next year, and with die size penalty versus DDR4 due to their on-chip ECC feature, it is expected to affect DRAM supply thereafter. 당사는 3분기에 한 자릿수 초반의 DRAM 출하량과 10% 후반대의 NAND 출하량 증가를 계획하고 있습니다. 또한 올해 당사의 연간 DRAM 출하량은 지난 1분기에 예상했던 것과 같이 시장 수요 성장률과 비슷한 수준을, 그리고 NAND 출하량은 시장 성장률을 큰 폭으로 상회하는 수준의 성장을 계획하고 있습니다. SK hynix is planning for a low single-digit bit shipment growth for DRAM and high 10% growth for NAND in the third quarter. For the year, we maintain the guidance given out in the first quarter that DRAM bit shipment is expected to be in line with market demand growth, and NAND bit shipment growth is planned to far outpace the market growth rate. 올해 당사의 주력인 DRAM 1z 나노미터 제품은 계획대로 2분기 본격적인 램프업으로 원가 절감에 기여하였습니다. 하반기에는 1z 나노미터 기반의 16GB 제품의 양산 확대를 통해 64GB 이상의 고용량 서버 수요에 적극 대응하여 DRAM 시장 내 자사의 위상을 공고히 하도록 하겠습니다. The company's mainstream product for this year, DRAM 1z nano, went into full-scale ramp-up in the 2nd quarter, helping reduce unit cost. In the 2nd half, the company will solidify its position in the DRAM market by actively addressing the 64GB or higher density server demand by expanding the production of 1z nanometer-based 16GB products. EUV 기술을 적용한 1a 나노미터 제품은 최근 모바일향 제품의 양산을 시작하여 하반기에 고객들에게 공급될 예정입니다. 또한 내년부터 수요가 확대될 DDR5 제품도 올해 하반기 양산을 시작하여 고객 요구에 적시 대응하는 동시에 시장의 DDR5 전환을 지원할 계획입니다. 1a nanometer product, which applies EUV technology, recently started volume production for mobile application to be supplied to customers starting in the second half. DDR5, whose demand is expected to grow from next year, will also go into mass production in the second half of the year to ensure timely response to customers' needs and support market's transition to DDR5. NAND 역시 올해 당사의 주력인 128단 제품 비중이 2분기 말에 50%를 넘어서며 원가 절감에 기여하였습니다. 차세대 제품인 176단은 계획대로 올해 말 양산을 시작하여 연말에는 128단과 176단의 비중이 80%에 육박할 것으로 예상됩니다. For NAND, the company's mainstream product this year, the 128-layer, went over 50% in sales portion in the second quarter, also contributing to unit cost reduction. The next generation, the 176-layer, will go into mass production by the end of this year, at which time the sales portion of 128-layer and 176-layer combined will be close to 80%. 당사는 고객들로부터 경쟁력을 인정받고 있는 128단 제품의 적극적인 비중 확대를 통해 하반기 강한 성장이 예상되는 모바일 신제품과 Enterprise SSD 수요에 대응할 계획입니다. 이를 통해 NAND의 수익성 개선을 가속화하여 3분기에는 흑자 전환을 이루고 향후 지속적으로 수익을 창출할 수 있는 기반을 마련하도록 하겠습니다. The company will aggressively expand the portion of the 128-layer, whose competitiveness is well recognized, to respond to demand for new mobile products and eSSD that are expected to surge in the second half. This will help quicken the pace of improvement in NAND profitability to turn around to profit in the third quarter and lay the basis for sustainable profit generation. 마지막으로 지난 분기 당사의 ESG 경영 활동과 성과를 말씀드리겠습니다. Last is the company's ESG management activities and achievements in the previous quarter. 당사는 지난 4월 주요 환경 이슈를 다루는 글로벌 정보 공개 프로젝트인 CDP, 즉 탄소 정보 공개 프로젝트에서 최고 등급의 평가를 받았습니다. 참여한 9,000여 개 글로벌 기업 중 당사는 2020년 탄소 경영 부문과 물 경영 부문에서 각각 높은 평가를 받았으며, 이를 토대로 CDP 한국위원회로부터 탄소 경영 부문 Platinum Club과 물 경영 최우수 기업에 선정되었습니다. In April, the company received the highest rating from the Carbon Disclosure Project, or CDP, a global project for information disclosure in environment. Of the approximately 9,000 participating global companies, SK hynix earned top scores in climate change and water security in 2020 and was selected for the Platinum Club in climate change and awarded first prize for water security by CDP Korea. 특히 Platinum Club은 당사가 국내 기업으로서는 최초로 2013년에 진입한 이후 8년째 그 지위를 유지하고 있습니다. 이를 지속 이어갈 수 있도록 앞으로도 기후변화 대응과 수자원 관리에 노력해 나갈 것입니다. Particularly for the Platinum Club, the company has maintained its position for eight years in a row since becoming the first member in Korea in 2013. We will keep up our efforts on climate change issues and water resource management to sustain the honor. 한편, 2분기 중 SASB, 즉 Sustainability Accounting Standards Board의 핵심적인 기준과 TCFD, Task Force on Climate-related Financial Disclosures 권고안에 따른 정보를 충실하게 담아 2021년 지속 가능 경영 보고서를 발간하였습니다. 이와 함께 인권경영 정책과 리스크 관리 체계, 인권 영향 평가와 개선 활동 등 당사의 인권 관리에 대한 보다 심층적인 내용을 담아 처음으로 인권경영 보고서를 발간하였습니다. In the second quarter, we published the 2021 Sustainability Management Report, faithfully reflecting the key standards of the SASB, or the Sustainability Accounting Standards Board, and the recommendations of the TCFD, Task Force on Climate-related Financial Disclosures. We also published the Human Rights Management Report for the first time, detailing the company's human rights related activities such as human rights management policy, risk management system, impact assessment, and improvement activities. 당사는 실적 개선을 위한 노력뿐 아니라 ESG 경영 강화와 소통에도 성심을 다하여 지속 가능한 성장을 이루기 위해 최선을 다하겠습니다. 감사합니다. The company will keep up our effort to not only improve financial performance, but also ESG management and external communication to keep working towards sustainable growth. Thank you very much for your attention. 그럼 지금부터 Q&A 세션을 진행하겠습니다. With that, we will now take your questions. 처음으로 질문해 주실 분은 다이와증권의 김성규 님입니다. The first question will be presented by S. K. Kim from Daiwa Capital Markets. Please go ahead with your question. 안녕하세요. 질문 기회 주셔서 감사합니다. 우선 좋은 실적 축하드립니다. 저는 DRAM 시황 관련해서 질문을 드리겠습니다. 2분기에 지금 DRAM 가격이 큰 폭으로 상승했는데요. 3분기에는 지금 제품에 따라서는 추가적인 가격 인상에 대한 일부 저항이 있는 것으로 보입니다. 물론 가격은 지속적으로 상승할 걸로 예상이 되지만. 그리고 특히 데이터센터 거래선들의 재고 수준에 대한 우려가 지금 시장에 있는데요. 하반기에 재고 수준이 계속 지속적으로 증가할 경우에는 4분기부터 가격이 하락할 수 있다는 우려들도 투자자들 사이에서 일부 있는 것 같습니다. 그리고 공급 측면에서는 지금 업체들이 투자 증가하면서 다시 공급이 증가할 것에 대한 우려가 있는데요. 하반기 DRAM 시황과 가능하시면 내년에 DRAM 업황에 대한 전망에 대해서 지금 회사가 보시는 의견 부탁드리겠습니다. 감사합니다. First of all, congratulations on your performance. Now my question is pertaining to the DRAM market. Now in the second quarter, we see that the DRAM prices went up quite sharply. Going into the third quarter, of course, there is expectation that the prices will continue to rise. At the same time, there appears to be some resistance against the price increase, especially per certain products. Now for the data centers as well, there are some concerns in the market regarding the inventory level among some of the data center customers. Now, if in the second half, if the inventory continues to rise, then there are some concerns among the investors that the prices might start to fall in the fourth quarter of the year. With the increased investment by the suppliers, there's also the likelihood that supply will increase. What is the company's view regarding the DRAM market in the second half? Also, if possible, what is your outlook for the DRAM market in next year? 질문 주신 내용에 대해서 답변드리겠습니다. 내용이 상당히 복잡하고 중요한 내용들이 많아서 다른 때보다 조금 시간이 걸리더라도 저희가 생각하는 부분을 말씀을 드리도록 하겠습니다. 올해 시장을 볼 때 작년 말, 연초 기준에서 봤었을 때 가장 중요했던 부분은 사실은 코로나 사태 회복이라는 부분과 그다음에 그거에 대한 수요 대응을 공급사들이 어떻게 할 거냐였고요. 그때의 방향성은 결국은 공급사들의 생산량으로만은 부족하니 아마도 재고를 최대한 활용해서 수요 대응하는 거 아니겠느냐, 이게 시작이었습니다. First of all, let me say that your questions are quite complex and also includes very important points. Please understand that my response is going to be a bit longer winded than usual so that I will be able to fully respond to the questions. Compared to looking back to the market early this year or even late last year, the most important question was the COVID situation or how we were going to recover from the COVID situation. In response to that, how the suppliers were going to address the growing demand coming out of the COVID situation. At that time, the thinking was that just utilizing the production capacity was not enough, and that we had to tap into the inventory in order to fulfill the growing demand. Looking at it from that perspective, then we see that demand starting this year was much stronger than expected. Especially demand coming from the 5G-based smartphones was stronger than expected, as well as the demand for PCs. The demand in general was stronger than what we had initially expected at the early part of the year. This, of course, resulted in, as expected, a reduction in the inventory level on the supply side. Looking at it from those big trends, then we see that in terms of the supply-demand dynamics in the market, they are stronger than we had initially expected in the market, especially for the consumption demand. Of course, there have been some corrections to the demand because of the parts supply disruptions, but then not so much so that it would alter the fundamental course of the demand growth. Looking at the current trend, which are likely to continue into the end of this year and also all the way into next year, we believe that because of both the demand and supply factors combined in the industry, we believe that for the industry overall, the inventory level will continue to decline. Also from the demand perspective, there are also a number of important factors that we have to watch out for in the second half and also into next year. In the second half, there are a number of commerce events that have been planned in various parts of the world. Into next year, we are likely to move further away from the COVID-19 situation, meaning that the demand recovery coming from the consumer sector will now then move on to the enterprise sector. Overall, we believe that the enterprise demand will be further stimulated moving into next year. Also after the COVID-19, in the post-COVID era, we believe that there will be demand growth coming from the 5G standalone clients. This will further stoke demand for the 5G smartphones as well, also combined with the growth in the 5G-related infrastructure. This means that compared to the pre-COVID situation, the IT industry's time series, I would say, has been pulled up by about 2 to 3 years. A bit more about the supply side. Next year, looking at the market and the industry overall, we believe that continuous growth has to come from new and emerging technologies like the LPDDR or DDR5 or the EUV process. This is likely to temporarily pull down the productivity, but also increase the product value. For the market in general, we believe that there is going to be continuous growth in the size of value. [Foreign language] 다음으로 질문해 주실 분은 UBS의 Nicolas Gaudois입니다. The next question will be presented by Nicolas Gaudois from UBS. Please go ahead with your question. Good morning. Thanks for taking my questions. Going back to demand, I think what investors have been worried about is really any variations in demand into the second half of 2021. Maybe if you could broaden the spectrum beyond DRAM to NAND flash as well and outline if you've seen any changes up or down in the second half of the year so far for specific segments. You just commented on inventories for DRAM potentially coming down. Could you maybe provide a little bit more color on what you expect each segments to do in the second half of the year, and maybe NAND flash as well? Secondly, you just talked about DRAM 1a nanometer production starting on the mobile side, which seems to be slightly early. How would you characterize yields so far? What portion of wafer starts should be at 1a nanometer by Q4 of this year? What's the broad target for Q4 2022 as well? Thank you. 먼저 수요에 대해서 질문드리도록 하겠는데요. 지금 투자자들이 우려를 하고 있는 부분은 2021년 하반기부터 시작해서 수요에 대해서 변화가 발생하지 않을까라는 측면입니다. 그래서 혹시라도 지금 시기에 수요와 관련하여서 특정 응용처별로 어떤 변화가 감지되고 있는지, 수요의 증가라거나 감소라거나 지금까지의 흐름과는 다른 변화가 감지되는 것이 있으면 말씀해 주시기를 바라고요. 그리고 앞서서 DRAM 재고가 계속 하락할 것으로 예상이 된다라고 말씀하셨는데, 이것도 마찬가지로 그러면 세그먼트별로 이 재고에 대해서 어떻게 내다보시는지, 그러니까 하반기에 재고에 대해서 말씀 부탁을 드리고. 그리고 두 번째 질문은 1a 나노, 그러니까 모바일 용으로 1a 나노에 대한 양산이 시작이 되었다라고 말씀드렸는데요. 예상보다 조금 빨리 시작한 것으로 보이는데 현재 수율이 어떠한지가 궁금하고요. 그리고 또 2022년 4분기까지 이런 1a 나노와 관련된 양산의 계획에 대해서 말씀 부탁드립니다. 질문 주신 내용에 대해서 답변드리겠습니다. 하반기 응용처별 수요는, 일단 서버는 저희가 기존에 바라보고 있던 전체적으로 빌드 수요는 상당히 견조한 걸로 그렇게 보이고 있고, 배후 수요들도 저희가 이야기를 들어보면 큰 변동 없이 견조한 걸로 보고 있습니다. First, regarding the demand by application in the second half. First, regarding the server side, we see that the build demand continues to remain solid for server, and also the related demand also remains largely unchanged. 서버의 경우에는 그러한 부분들이 올해 출시된 새로운 CPU의 성숙기 도입과 내년에 출시될 새로운 CPU들의 수요, 이런 것들과 맞물려서 지속적으로 견조한 흐름을 보일 걸로 보이고요. PC 같은 경우에는 사실은 저희가 보던 거 대비해서 고객, 시장의 어떤 보이스는 수요가 좀 더 강했습니다. 다만 부품 수급 이슈에 따라서 특히 로우엔드 제품들, Chromebook 같은 쪽에 영향은 조금 있는 걸로 보이고, 다만 그러한 부분들이 결국은 하이엔드 세그먼트 쪽, 게이밍이나 이런 하이엔드 세그먼트 쪽으로 쉬프트되면서 로우엔드 쪽의 메모리 믹스는 좀 줄고, 하이엔드 쪽의 고용량 메모리가 늘어나는 이러한 믹스 쉬프트로 인해서 수요 변동의 영향은 제한적일 걸로 보고 있습니다. For the server side, we see the demand likely to remain solid for some time, thanks to the CPUs that have been launched this year, going into maturity, and then also the new CPU slated for launch next year. For PCs, now we actually see that compared to what we had expected, the demand coming from the customers was a bit stronger than our expectation. Overall for the demand for memory, now on the low-end side, for the low-end products, there have been some issues, especially for the Chromebook because of the part supply. We see that the demand actually has then shifted to the high-end segment. We see that for the low-end memory mix, there is likely to be a lower memory mix, while for the high-end, the memory mix is actually going to increase. Overall, this is going to even out the overall demand as well. 두 번째 질문하셨던 재고 관련돼서는 사실은 SCM단의 부품 수급 이슈가 워낙에 광범위하기 때문에, 업계의 재고 수준을 지금 저희가 평가하고 논하기에는 좀 어려운 부분들이 있고요. 다만 앞서서 제가 설명드린 것처럼 수요와 공급 전체 관점에서, 인더스트리 관점에서 봤을 때 재고는 올해 내년으로 가면서 지속적으로 내려가는 모습일 걸로 현재 저희는 전망하고 있습니다. For the inventory level. Now, given the breadth of the part supply issues across the SCM, it is very difficult for us to speak regarding the inventory for the industry on the whole at this time. Our outlook is that for the industry, so looking at both the demand and supply side, then looking at both factors, then we believe that the inventory level will continue to decline into the end of this year and also into next year. 다음으로 1a 나노미터에 대해서 질문하신 것에 대한 답변을 드리겠습니다. 말씀드린 바와 같이 지금 1a 나노미터, 특히 모바일향 제품의 양산을 시작했습니다. 아시다시피 1a 나노미터는 하이닉스가 처음으로 EUV를 적용해서 생산하는 첫 양산 제품입니다. 다만, 1a 나노미터의 경우에는 EUV 기술을 쓰긴 하지만 본격 적용하기 전 테스트 성격이 있고, 그런 측면에서 보면 사실 기존에 적용해 왔던 테크 플랫폼을 유지하는 마지막 제품이기도 합니다. 따라서 양산이 의미하는 바가 수율이 어느 정도 이상 경제적으로 의미 있다를 뜻하겠고요. 아직까지 그 전 세대에 비해서 수율 관점에서 cost crossover가 진행되려면 시간이 좀 걸리겠습니다만, 말씀드린 바와 같이 기존 테크 플랫폼을 유지하는 제품이라는 측면에서 빠른 수율 catch up이 이루어질 것으로 생각하고 있습니다. Regarding your question about the 1a nanometer. Yes, as you have also mentioned, we have started the volume production for the 1a nanometer product for a mobile application. As you would know, the 1a nanometer product is the first time that SK hynix is going to volume production utilizing the EUV technology. Having said that, although we are using the EUV technology for the 1a nanometer volume production, it also has somewhat of a testing purpose too. This is also going to be the last product where the existing technology platform will be maintained. Yes, on one hand, we have the volume production and so this also means that in terms of the yield, we have the economically viable yields so that we can go into the volume production. Also at the same time, in order to reach the cost crossover with the previous generation, it would take some time. Given that we are utilizing this existing technology platform, we believe that we will be able to have a rapid yield catch up. 네, 다음 질문해 주십시오. [Foreign language] The next question will be presented by Ricky Seo from HSBC. Please go ahead with your question. 예, 질문 받아주셔서 감사합니다. NAND 관련 질문이 하나 있는데요. NAND 마진 개선 폭이 생각보다 좀 빠르게 진행되고 있는 것 같은데 아까도 설명해 주셨지만, 원가 절감 요인, 마진 개선 요인 좀 더 elaboration 해 주시면 감사하겠고요. 지금 bit growth guidance 보면 계속해서 마진이 개선될 걸로 보이는데, 어느 정도까지 적정한 마진 수준이라고 보시는지 회사가 보는 전망치 설명해 주시면 감사하겠습니다. 그리고 DRAM 관련돼서 지금 4분기하고 내년 초에 수요에 대한 concern들이 있는데, 그거에 따라서 회사가 지금 계획하고 있는 CapEx implementation에 대한 어떤 변화나 일정 변경이 있는지 설명해 주시면 감사하겠습니다. 이상입니다. I have some questions about NAND. First, I see that the company's margin for NAND business has been improving much more quickly than expected. You have touched upon some of the factors earlier, but could you elaborate a bit more about the factors that are driving the margin improvement, for example, cost reduction? Also, given the bit growth guidance, I believe that we can expect the margin to continue to improve. What is the appropriate level of margin that the company sees, if you could give us an outlook regarding that? Another question is about DRAM, and there are some concerns about the demand movements in the fourth quarter and early part of next year. Now, depending on the demand situation, does the company have plans or plans to make changes to the CapEx implementation or maybe some changes to your timeline of the CapEx? 네, 먼저 NAND 시황에 대해서 말씀을 드리겠습니다. 하반기 NAND 시황은 서버에서의 신규 CPU 출시 그리고 모바일에서의 5G 확산, 신제품 출시 등으로 인해서 수요가 계속 증가되고 있습니다. First about the NAND market. We see that demand continues to increase in the second half due to the new CPU launches in the server and also for the mobile side, the continuing penetration of 5G and new product launches. 여기에 하반기 계절적 성수기까지 합쳐져서 하반기에 NAND 수요는 2분기 대비 많이 증가할 것으로 예상하고 있습니다. Combined with the favorable seasonality, we believe that the demand for NAND in the second half is likely to swiftly increase compared to the second quarter. 특히 중화 모바일 업체들의 고용량 메모리 채용으로 인해서 수요는 더욱더 가속화될 것으로 전망을 하고 있고요. 그로 인해서 NAND 전체의 판매 물량은 늘어날 것으로 예상을 하고 있습니다. Especially there is a demand for high-density memory coming from the mobile companies in the Greater China region, which we believe will further drive demand. Overall, the demand for sales for the NAND in general will continue to increase. NAND 쪽의 적정 마진이라는 것은 저희 기업 입장에서야 마진이 많을수록 좋겠지만, sustainability가 중요할 것 같고요. SK hynix가 말씀드린 바와 같이 3분기에 분기 turnaround를 지금 예상하고 있습니다. 그리고 연간 전체적으로도 흑자 전환을 지금 기대하고 있는 상황입니다. 향후에 현재 128단과 176단의 자사 제품의 경쟁력을 고려하면, 내년 이후에도 이러한 흑자 기조가 유지될 것으로 예상을 하고 있습니다. 다만 올해 말에 예정된 Intel NAND business의 closing이 완료되고 나면 내년에 일부 일회성 비용들이 반영될 것으로 보이지만, 양 비즈니스를 합치게 되면 대략 지금 수준의 market share보다는 상당히 큰 폭의 market share 개선이 이루어질 것으로 보이고, 그 과정에서 여러 가지 cost synergy들도 있을 것으로 예상되어 그러한 일회성 비용의 효과는 단기적으로 빠르게 상쇄될 것으로 보여서 향후에 중장기적인 당사의 NAND turnaround 기조는 이어질 것으로 예상하고 있습니다. Regarding your question about the appropriate margin for NAND. Of course, for the company, the higher the margin, the better. Of course, what is important is sustainability as well. As we had explained earlier, we are looking toward a quarterly turnaround in the third quarter of this year. For the year as well, we are expecting a turnaround to profit. For the 128-layer and 176-layer products. Based on these products, you would know the company's competitiveness. Thanks to the competitiveness of these products, we believe that we will be able to maintain profitability next year as well. Having said that, there is the factor of the Intel NAND business acquisition, which we are planning to complete the closing of by the end of this year. As a result of this, there could be some one-off costs to be incurred next year. With the combination of these two businesses, we believe that the market share is going to increase quite considerably. Also in that process, there would be some synergy effects to be gained in cost as well, which is likely to more than offset the one-off costs related to the combination. All in all, we believe that the NAND turnaround to profit for the medium to longer term will continue. 두 번째로 질문하신 DRAM 상황에 따라 CapEx implication 관련해서 설명을 드리면요. 일반적으로 메모리 industry에서 여러 가지 사이클이 존재하는 이유가 수요 대비해서 공급단에서 CapEx 조정이 그동안 쉽지 않았기 때문입니다. 하지만 최근 상황은 수요단의 변화를 통해서 공급 측면에서의 투자를 조정하는 리드 타임이 예전 대비해서 굉장히 짧아지고 있습니다. 즉, 시장에 대해서 그만큼 대응하는 스피드가 빨라졌다는 것이기 때문에 사실은 예전과 달리 사이클이 굉장히 전형적으로 나타나지 않는 상황이 되고 있습니다. 그래서 불황이 와도 빠르게 수급이 개선되고, 호황도 예전 대비해서는 그렇게 오래가지 않는 새로운 유형의 모습을 보이고 있습니다. Regarding your question about the DRAM market's implications on the company's CapEx plan. Now, if I may take a step back and explain about the cycles in the market. Now, usually there are various cycles in the memory industry because, compared to the fluctuations in the demand, it's not as easy to make adjustments to the CapEx on the supply side. As a result of this, there have been some fluctuations in the cycle so far. What we are seeing more recently is that addressing the demand changes, there is a much quicker decisions regarding the investment changes on the supply side, meaning that the lead time has been much shortened. This means that the speed to address the changing market needs has also become much faster. That is why the cycles that we are seeing recently are not the type of conventional or the typical cycles that we are used to. Whenever there is a downtime, then a demand will pick up more quickly than before. Likewise, any boom time is not going to last as long as it used to in the past. We believe that such changes bode well not only for the interest of the memory suppliers, but it is also better for the customer side, meaning that it is beneficial in increasing the overall social welfare. Now, having said that, now for the, let's say, any changes in the market, the company is also able to adjust the CapEx more agilely than before. At the same time, as we have explained earlier, looking at the overall suppliers, then the inventory level, especially for DRAM, is considerably low at this time. For next year, if the demand continues to grow at this pace, then we would have to make additional CapEx, invest additional CapEx into the production capacity in order to fulfill the demand. Because of this, what we have announced in the last quarter about our CapEx plan to fulfill the demand for next year will continue as planned. Having said that, the CapEx size is not going to change because of the, let's say, growth in demand in the fourth quarter. The next question will be presented by Hyunwoo Do from NH Investment & Securities. Please go ahead with your question. My question is regarding the DDR5. This was mentioned briefly earlier, but I believe that that is one of the most hotly anticipated product in the market in 2022. With the DDR5, of course the die density will grow, but also there will be some die size penalty, as was mentioned. With the launch of the DDR5, what does the company expect in terms of any changes to the demand, supply or the pricings? Regarding the launch of the DDR5 next year, yes, we believe that next year is going to be the opening of the era of the DDR5. Looking at it from this perspective, one is from the demand side. We believe that the DDR5 is also going to drive the density for DRAM as well. It is probably going to move the DRAM to a higher density. By the end of the year, the 64 gigabyte in the DDR4 is going to reach close to the half line point. We believe that this trend is going to continue in the server segment next year. Product value 관점에서, DDR5가 갖고 있는 성능상 장점이 확연하기 때문에, 결국은 이러한 부분들이 신규 CPU와 맞물려서 내년도 DRAM의 전체적인 가치 상승을 drive하는 그런 제품으로 역할을 할 걸로 기대하고 있습니다. From the perspective of the product value, now, because the DDR5 offers very clear advantages in terms of performance and also combined with the new CPU to be launched next year, we believe that it will serve to further drive up the overall value of DRAM. 서버 뿐만이 아니고 PC까지 함께 저희가 DDR5에 대한 시장 출시 및 ramp up을 위해서 파트너들과 고객들과 가장 선도적인 위치에서 잘 진행을 해나가고 있습니다. 그래서 내년도에 저희가 서버 쪽에서 좀 더 경쟁력을 확보하는 그런 제품이 될 수 있을 걸로 기대합니다. To make sure that we can launch the DDR5 products not only for the server but also for the PCs, we are leading the way, working together with the partners and customers in terms of the launch in the market and also for the ramp-up of the production. We believe that the DDR5 will further solidify our competitiveness in the server market. 네, 다음 질문해 주십시오. 다음으로 질문해 주실 분은 Bank of America의 우동제 님입니다. The next question will be presented by Dong-je Woo from Bank of America. Please go ahead with your question. 질문 기회 주셔서 감사드리고요. 다시 한번 좋은 실적 축하드립니다. 이왕 말씀해 주신 김에 DDR5 관련해서 추가적으로 저도 좀 궁금한 게 있는데요. 현재 시장에 출시된 Intel의 CPU가 아직은 DDR5를 지원하지 않고, Intel이 지난 2, 3년간 계획 대비 늘 신규 CPU 출시 지연도 많이 있었습니다. 그래서 이번에는 만약에 Intel의 CPU 공급이, 특히 차세대 CPU인 Sapphire Rapids라든지 이런 게 2분기부터 본격적으로 출시된다는 가정하에 지금 DDR5를 전망하시는 건지, 아니면 AMD 쪽에 관련된 수요가 나온 건지. 그거를 좀 더 구체적으로 우리가 하반기, 내년 상반기로 나눠서 설명해 주시면 감사드리겠고, 두 번째 질문은 그 이후에 한번 드리겠습니다. 감사합니다. Since we are on the topic again regarding the DDR5. Currently, Intel CPU does not support DDR5, and Intel also has the track record of having some delay in the launch of their new CPUs compared to the plan. I wonder whether your outlook for the DDR5 is based on the assumption that the Intel's new CPU, for example, the Sapphire Rapids, will be launched on schedule in the second quarter, or is it related to other, like AMD demand and so forth? DDR5 관련해서 좀 더 말씀드리겠습니다. CPU 업체들의 일정이 과거에 어떠했고 미래에 어떠할지 저희가 이야기하는 거는 적절치 않은 것 같고요. 다만 그러한 변수들이 있을 때 저희한테 어떤 영향을 줄 거냐라는 관점에서 보면, 내년도에 앞서 말씀드린 것처럼 DDR5라는 도입 이벤트는 전체적으로 수요에 매우 긍정적으로 보고 있고요. 다만 무언가 변수가 발생했을 때는 결국은 이 부분이 올해 출시된 CPU의 성숙기 운영과 맞물려서 DDR4와 DDR5 혹은 모바일과 서버 간의 어떤 그러한 mix 운영으로 충분히 대응이 가능할 걸로 보고 있습니다. 그래서 이게 중요한 수요 관점의 catalyst인 거 맞고요. 운영상의 어떤 risk할 가능성도 그닥 크게 보고 있지는 않습니다. Regarding the, let's say, the CPU suppliers or their, let's say, timeline in the past or in the future, I don't think we are in this position to make comments on that. For any factors, of course, we would have to think about the potential impact and be ready for it. For next year, the launch of the DDR5 itself is going to be an event that is going to drive further demand. Of course, if there are some, let's say, unexpected factors that occur, then we believe that still there would be a healthy environment to keep driving demand. For example, the CPU launched this year will be maturing. There can be a combined usage of DDR4 and DDR5 and also the demand mix coming from both the mobile and the server side. We believe that the demand will continue to remain solid. Of course, what you have mentioned is going to be 1 catalyst for demand, but we do not believe that is going to turn into a big risk. My follow-up question regarding the M16 fab. The M16 fab has gone into operation, but I understand that at this site there is no more land to build new facilities. In order to build a new fab in the Wonsam-myeon area, I understand that it would take at least a few years. Do you believe that with the existing M16 size, it will be enough to sustain the business for the next 3 to 5 years, for example, utilizing more EUV and also moving on to 1B, 1C technology. Do you believe that you will have enough space for the clean rooms for the continuous tech migration? In addition to that, I would like to gain a better understanding of the company's overall fab operation plan. What we used to call the M10, for their conversion to CMOS and also the facilities in Cheongju, what are your plans for those as well? You're right that the new site that we have secured in the Wonsan-myeon of Yongin, now this is for the company to secure a new site for a new fab. Yes, as you have mentioned in the Icheon site there is not enough land left to build another large scale fab. The M16 fab, now it is much bigger in size than the existing fabs. For example, other fabs are 2 layered, whereas for the M16 it is 3 layered, including 1 layer for EUV. In terms of capacity, it is much bigger than the existing fabs and it just got started in its operation. Until we have the, let's say, if necessary, until we have a new fab ready in Yongin, we believe that it will provide us with enough capacity for the next few years. That having said that, of course, the memory industry tends to be very dynamic and also subject to rapid changes. In the event of such drastic changes in the demand, then of course we do have some backup options. For example, we could move some of the NAND capacity from M10 to Cheongju, or also the M10, which is slightly outdated, so is not being fully utilized. We can also put the M10 into more utilization. Of course, there is always the option of utilizing the Wuxi more actively. We do have such a backup plan, but our assumption remains the same, that the M16 will provide us with enough capacity for the next few years. Let me make one correction. I mentioned that if such a drastic demand occurs, then we could also move some of the NAND from M10 to I'm sorry, M14 to Cheongju, not M10. The next question will be presented by Min Seong Hwang from Samsung Securities. Please go ahead with your question. From the supply side, we see that your peers are increasing supply more than anticipated. When it was announced that some of the investment plan for next year will be pulled up, the market reacted somewhat negatively. What is the company's plan for the capacity for this year and next year for M16 DRAM and N15 NAND? What do you believe is going to be the production capacity? It was mentioned that the industry's inventory in general is going to decline. Do you believe that this merits a higher CapEx investment next year compared to this year? From the supplier side in the market, our perspective is how we can provide enough supply to meet the demand coming from the market. That, I would say, is the most important question for the supplier. What I mean is that we are not really thinking about or acting out of fear that what is increased CapEx leads to changes in the supply-demand dynamics and also because of the competition among the suppliers. That is not our particular worry. It's more about how we are going to meet the strong demand coming from the market. Regarding the wafer capacity at M15 and M16, I do not believe it is appropriate for me to make comments on them at this point. Again, our basic position is that there has to be sufficient CapEx investment made in order to fill the demand. What I mean by CapEx investment, it's not just about the absolute size, it's more as a percentage out of the sales or EBITDA. When we think of it in those terms, and I do not believe that it is going to increase dramatically. Especially given the strong demand and the rise in the ASP, I do not believe that the CapEx for next year as a percentage out of the sales or the EBITDA is going to increase all that much. It is probably going to be maintained around the same level. 네, 이제 마지막 질문 받도록 하겠습니다. [Foreign language] The last question will be presented by JJ Park from JPMorgan. Please go ahead with your question. 예, 질문 기회 감사드립니다. 첫 번째 질문은 아까 CFO분께서도 말씀하셨지만 1a 나노에서 EUV adoption이 그렇게 크지는 않을 거라고, 저희가 one layer 정도 적용하고 1B 나노에서 multiple layer의 EUV 공정을 적용하는 걸로 알고 있는데 이게 회사마다 전략 방향이 다른 것 같아요. 그래서 만약에 1B 나노 기준으로 EUV 프로세스가 non-EUV 대비해서 어떤 장점들이 있는지, 이거를 die size가 작아진다든지 아니면 throughput time이 빨라진다든지, 장점이 어느 정도 있는지 말씀해 주시면 감사드리겠고요. 두 번째는 Intel NAND 관련돼서 아직 중국 정부 쪽의 approval이 안 나온 것 같은데 현재 상황이 어떤지 update 해주시면 감사드리겠습니다. My question first, I believe that the CFO also touched upon this earlier, about the EUV adoption for the 1a nanometer. I understand that the EUV adoption at this point is not significant. In other words, it is only applied for 1 layer. I also understand that the plan is to start applying the EUV at multiple layers for 1B nanometer products. Of course, I believe that each company would have different strategy for the EUV technology. Let's say for the 1B nanometer product, compared to EUV process and non-EUV process, what do you believe are the advantages of the EUV process? For example, is the die size going to be smaller or the process time going to be much shorter? Just about the advantages of the EUV process when applied to the 1B nanometer. My second question is a request for update on the Chinese authorities approval for the Intel NAND business acquisition, because I understand that the approval has not been given yet. Any update? 말씀하신 대로 자세히 1a 나노미터 같은 경우에는 EUV layer가 많지 않습니다. 그렇기 때문에 아까 말씀드린 바와 같이 기존의 tech platform을 유지하되 EUV 기술을 처음으로 테스트하고 적용하는 첫 제품이라고 말씀을 드렸고요. 다른 경쟁사들 같은 경우에 다 처한 상황이 좀 틀린 것 같습니다. 기존에 이미 회사가 가지고 있는 EUV를 활용해야 되는 쪽도 있는가 하면, 또 기존의 immersion을 최대한 연장해서 쓰려고 하는 회사도 있습니다. 저희가 아마 그 중간 정도의 전략을 취하고 있는 것 같고요. 아마 각자 처한 상황에 따라서 적절한 EUV adoption speed를 채택하고 있는 것 같습니다. For the 1a nanometer, yes, the EUV application is not that many in terms of the number of layers. That is why, as I explained earlier, we are maintaining the existing technology platform, and we are applying the EUV on the 1a nanometer products for testing purpose. As you have mentioned, different companies would have different approaches to the EUV. Some would try to put their existing EUV equipment to more utilization, while some might try to extend the use of the immersion technology as much as possible. I would say that we probably stand somewhere in the middle. I believe that the different companies would have their own EUV adoption pace according to their circumstances. 기술적으로 자세히 설명하기보다는 조금 general한 term으로 설명을 드리면, 이게 결국 우리가 말하는 tech shrink라고 할 때 계속해서 20나노대에서 10나노대, 10나노대에서 under 10나노대 이런 식으로 해서 가야 결국 한 wafer에서 얻을 수 있는 chip의 양이 많아지고 그게 결국 원가 절감을 의미하는데요. EUV가 가지는 기존의 immersion lithography 대비해서의 장점은 결국 EUV의 파장 자체가 immersion보다 작기 때문에 결국 아주 세밀하게 우리가 원하는 디자인을 wafer에 그릴 수 있다는 측면입니다. 기존의 immersion이 예를 들어서 파장이나 기술적 특성의 한계로 세 번, 네 번의 공정을 거쳐야 그릴 수 있었던 디자인을 EUV 같은 경우에는 한 번에 그릴 수 있다는 장점이 있고요. 그 경우에 공정 step의 수가 급격히 줄어들게 됨으로써 여러 가지 원가 측면의 긍정적인 부분이 있을 수 있습니다. 다만 EUV를 처음 도입하는 만큼 우리가 예상하지 못했던 여러 가지 어려움들이 존재할 것으로 예상되고 그러한 어려움들을 누가 얼마나 빨리 극복하느냐가 향후에 경쟁력의 초점, 경쟁력을 확보하는 중요한 관점이 될 것 같습니다. Now, without going into much technical details, if I may just give you a high level explanation, then for what's called the tech shrink. Going from 20 nanometer to 10 nanometer, then to under 10 nanometer, means that we get more chips out of 1 sheet of wafer. This also means that we can further reduce cost. Now between the EUV and the immersion technology, now EUV's wavelength is shorter, meaning that it is more conducive to enabling more detailed design on the wafer. For the immersion technology, the wavelength is longer and also because of the inherent technical limitations, for certain designs, it had to go through the process 3 or 4 times in order to get the right design. For the same design, EUV can do this in one iteration, meaning that the number of process steps can be reduced quite a lot, which also is much helpful for cost reduction, too. Having said that, EUV also has some challenges, especially when you're adopting it for the first time, there could be some unexpected technical difficulties. Depending on who can overcome such difficulties, how quickly would also spot the difference in securing the competitiveness. 두 번째 질문에 대해서 답을 드리겠습니다. 현재 Intel 낸드 비즈니스 인수 관련해서는 중국을 포함해서 저희가 총 8개국의 반독점 심사를 진행 중에 있습니다. 현재 중국을 제외한 나머지 7개국에 대해서는, 미국, EU 등을 포함한 나머지 7개국에 대해서는 unconditional한 approval을 현재 받은 상태입니다. 따라서 이제 마지막으로 남은 승인 프로세스는 중국으로부터 오게 될 것인데요. 현재 final review 단계로 넘어가 있는 상태이고, 저희가 예상하는 올 연말 deal closing에 문제가 없도록 대략 하반기 적절한 시점에 중국으로부터 필요한 승인들을 모두 받을 수 있을 것으로 기대하고 있습니다. Your second question was about the approval for the Intel NAND business acquisition. Now, including China, we went through the antitrust review in 8 countries, and we have received the unconditional approval from 7 countries, including the U.S. and the EU. The last in the approval process is to come from China. For this, what we are hoping for is to receive the approval in an appropriate time in the second half of the year, so that we will be able to have the closing of the deal by the end of this year as we are planning to. Right now the process in China is in the final review phase. 네, 이상으로 SK hynix 2021년 2분기 경영실적 conference call을 모두 마치겠습니다. 참여해 주신 모든 분들께 감사드립니다. Thank you very much. That concludes the SK hynix 2021 second quarter earnings release conference call. Thank you very much for your participation.