Good morning and good evening. First of all, thank you all for joining this conference call. Now we will begin the conference of the fiscal year 2020 third quarter earnings results by SK hynix. This conference will start with the presentation, followed by a divisional Q&A session. If you have a question, please press star one, that is star and one, on your phone during the Q&A. Now we shall commence the presentation on the fiscal year 2020 third quarter earnings results by SK hynix.
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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 2020 third quarter earnings release conference call.
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Before starting the conference call, allow me to introduce the executives present here with me today. First, Lee Seok-Hee, CEO and President of SK hynix. Cha Jin-Seok, CFO. Park Myung-soo, Head of DRAM Marketing, and Kim Jeong-tae, Head of NAND Marketing.
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Let me issue a disclaimer that all outlooks presented by the company are subject to change depending on the macroeconomic and market circumstances.
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With that, we will now begin SK hynix earnings release conference call. The CFO will first present the earnings for this quarter and the company's market outlook, followed by the CEO with a briefing on the acquisition of Intel's NAND business and future plans.
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Good morning. This is the CFO, Cha Jin-Seok. I will first report on the company's financial performance in third quarter 2020
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Consolidated sales in the third quarter was KRW 8.129 trillion, down 6% from the previous quarter. Although demand for mobile memory recovered as expected, server DRAM and SSD demand for data center showed weakness, leading to a downward turn in overall memory prices.
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DRAM bit shipment increased 4% quarter-on-quarter. Procurement trend by server customers remained slow. There was stronger demand for new product launches in mobile and graphics, and increased purchase of consumer products by certain customers. The company was able to outperform the original shipment guidance by actively responding to such trends. ASP declined 7% quarter-on-quarter, mainly led by weaker price for server DRAM.
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NAND flash shipment grew 9% quarter-on-quarter in line with the company's plan. Despite the slowdown of demand for data center SSDs, the company expanded sales of mobile NAND products and also of SSDs for newly launched game consoles. ASP fell 10% quarter-on-quarter as pricing showed weakness led by server products similarly to DRAM.
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MCP revenue rose 5% quarter-on-quarter, and revenue portion recorded 17%. Although MCP prices also declined, there was a double-digit percentage growth in shipment following demand recovery of smartphones in China.
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Operating profit in Q3 was KRW 1.3 trillion, down 33% quarter-on-quarter, and operating profit margin was 16%. Cost reduction continued from better yields of 128-layer NAND and further yield improvements of 96-layer NAND and 1Y nm DRAM on top of already matured yield levels, combined with the sales portion increasing for each of these tech nodes. However, it was not enough to offset the effect of price decline during the quarter.
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Depreciation and amortization in the third quarter was KRW 2.462 trillion, slightly up from the previous quarter. EBITDA was KRW 3.762 trillion with EBITDA margin of 46%.
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There was a net non-operating profit of KRW 49 billion. Gain on translation of borrowings offset foreign exchange loss following depreciation of the U.S. dollar.
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Corporate tax in the quarter was KRW 271 billion, decreased from the previous quarter. Net profit after tax was KRW 1.078 trillion with a net profit margin of 13%.
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Consolidated cash balance at the end of Q3 was KRW 4.756 trillion, down by KRW 509 billion quarter-on-quarter. Interest-bearing debt was KRW 11.703 trillion, down by KRW 987 billion.
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Next is the company's market outlook and plan.
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In the third quarter memory market, procurement trend of server DRAM and SSD weakened as major data center customers showed signs of inventory adjustment and weak pricing conditions continued.
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Moving into the later part of the quarter, there was seasonal demand for new smartphone product launches and spread of 5G smartphones by Chinese set makers, which made up for the relatively sluggish demand for computing products. In addition, new game console launches with increased DRAM content and first-time SSD adoption also helped to increase demand.
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Such demand trend per application is expected to be maintained into the fourth quarter. The relatively strong demand for mobile memory continues as smartphone makers compete over market share, and demand for PCs is expected to remain solid, thanks to strong sales of Chromebook. For servers, demand will be more moderate than in the first half, but customers' procurement for the year will be in line with earlier expectations.
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The company will focus on engaging with demand from mobile DRAM customers while further solidifying its position in the server DRAM market by leveraging quality competitiveness in leading edge technology. First, we will increase supply of 1Y nm LPDDR5, of which initial shipments have begun, and lead the market for LPDDR5 uMCP combined with high density NAND of 256GB and above. For server DRAM, we will increase the revenue portion of high density modules of 64GB and above. In particular, as next year's HBM demand growth is projected to show rapid growth at more than double of this year, we will maximize our HBM sales to maintain our leading position in the HBM market.
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For NAND, the company will strengthen response for a while towards smartphone products where demand is stable. We have started sales of 128-layer based NAND products to mobile solutions and client SSD market in Q3 and are in the process for customer qualifications of server SSD. The bit ratio of 128-layer products is expected to reach around 30% by this year-end. With further expansion of its portion, we expect 128-layer products to contribute more to our NAND profitability improvement.
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DRAM bit growth in the fourth quarter is planned to be up mid single- digit percentage quarter-on-quarter, and NAND bit growth is planned to grow by low single- digit percentage quarter-on-quarter.
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This concludes my presentation on third quarter performance and future plans. Let me now hand over to the CEO to provide a briefing on the company's acquisition of Intel's NAND business.
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Good morning. This is the CEO of SK hynix, Lee Seok-Hee. Against the backdrop of a historic decision for the company about two weeks ago, I would like to take advantage of this opportunity to personally share with our investors and analysts about the purpose of the acquisition and our future plans.
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The NAND industry, growing on the back of mobile related demand so far, is now at a turning point. We are now seeing the fourth industrial revolution manifested in such forms as the IoT and AI, and the foundation of this revolution is an unrelenting wave of data. For data that never ceases to be generated, the world's data center storage capacity has to grow rapidly to as much as 5.1 billion terabytes in 2030, which is a 5.7 times growth in 10 years. The SSD, with outstanding performance in speed and power consumption, will grow to about mid- 40%, and most SSD will be substituted from TLC based to QLC or PLC based that offer better cost per bit.
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SK hynix, making up for its later start in NAND business than its competitors, has been making meaningful achievements recently. There was also the limitation that due to unexpected market condition changes, the company was not able to accelerate as much as it wanted to at important inflection points of growth.
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To accelerate the pace of securing SSD technology and product portfolio, that will be the key drivers of NAND market growth in the future, and to overcome the limitation of scale, which would have been a constraint for some time as a latecomer, the company decided on October 20th to acquire the NAND business of Intel.
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Intel is particularly competitive in the data center SSD market. It is leading the standardization of PCIe interface with its deep understanding of the overall data center ecosystem and software workload. It has strong firmware and controller technology, as well as industry-leading QLC technology. In addition, its sales and marketing capability to support storage optimization technologies suited to the customer system level led to a diverse and balanced SSD customer base.
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On the other hand, SK hynix has fast tech development skill and stable ramp-up capability in NAND, as evidenced by our development of the world's first 128-layer 3D NAND, which led to growth of sales to high value-add applications. In addition, utilizing our in-house controller technology, the company has more than tripled its cumulative SSD sales by Q3 this year and is also achieving rapid growth in SSD business, especially for hyperscale customers. In mobile, the company is leading the high performance, high-quality markets with our MCP and UFS products in synergy with our DRAM business.
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Given the complementarity between the two companies' NAND business with minimal redundancy in strength and product portfolio, we will be able to extend our business opportunities into all areas of NAND. The penetration speed of SSD in data centers has been slow so far, despite its superior performance over HDD due to the relatively higher cost. However, it can contribute to lowering the total cost of ownership and SSD.
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The company will secure self-sustainable business strength in NAND within the next three years, and grow SK hynix NAND revenue to triple that before the acquisition in the next five years. With this effort, we will try our best to earn the recognition as a top memory player, not only a DRAM leader. We will also secure a more stable cash generation capability by striking a better business balance between DRAM and NAND, so as to establish future growth momentums beyond memory business.
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This acquisition will be closed in 2025 in two phases. First of all, in the first closing expected at the end of 2021, the company will acquire SSD-related technologies and products, including IPs, as well as sales capabilities, which will immediately boost our NAND revenue and profitability.
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Until the final closing in March 2025, Intel will operate the Dalian fab and design technology for manufacturing. The Dalian fab based on floating gate process is projected to accommodate two to three more generations, even after the current migration node of 144-layer. Floating gate technology, in particular, has lower cell-to-cell interference and fine retention characteristic, which, combined with QLC, will enable a competitive cost structure.
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The Dalian fab will focus on addressing the cold storage area by maintaining its floating gate process, while the Korean fab will focus on the hot storage and mobile segment by maintaining the charge-trap device bases. The two companies will also do their best to minimize uncertainties in tech development and fab operations in this period and facilitate the final closing.
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Total acquisition value is $9 billion , out of which $7 billion will be paid in cash at the time of the first closing. Around half of the acquisition amount will be covered through the company's reserved cash and cash equivalents, and the operating cash flow to be generated. The remaining balance will be financed through outside funding such as borrowing, while asset liquidation may also be reviewed if deemed necessary.
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For the medium term, the company will focus all its resources on strengthening its memory competitiveness and manage borrowing levels through prudent CapEx policies. Required CapEx for the Dalian fab is expected to be self-fulfilled through the operating cash flow generated from the sales of NAND produced from the Dalian fab.
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There are still important procedures to complete, such as regulatory approval, for which we will make the preparation to ensure final closing of its acquisition. That concludes my presentation. Thank you.
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We are now ready to take your questions.
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Now Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two, on your phone. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions for each participant.
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The first question will be provided by Marcus Shin from Mizuho Securities. Please go ahead with your question.
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I must say that initially my reaction to SK hynix's acquisition of Intel's NAND business was negative, and it is based on such negative perspective that I have written up my report as well. The CEO's presentation has done a lot to ease my concerns, and I'm sure that it has also eased many of the concerns by the analysts as well today. Thank you very much for taking the time out to deliver the presentation today. Having said that, I still have two remaining concerns, and I would now like to ask some questions regarding that. First is that, I understand that the CEO in your media interviews have also emphasized the value of the intangible assets of the NAND business of Intel.
I would say that when it comes to the intangible value of the business, the core asset would be the human resources or the talent. I would say that the big question now is how to prevent the drain or the turnover of such key human resources. I wonder what the company has planned, if you could give us some more details about how the company plans to prevent such a turnover of the key talent from the Intel NAND business. The second question is pertaining to the efficient use of limited resources. I would say that the acquisition this time might also be quite a good thing for the NAND industry overall, because on one hand it could, let's say, minimize competition and also increase market share for hynix.
Now, in order to keep up the market share that gets the boost from this acquisition, you would have to keep investing into the technologies that have been developed by Intel, so that when it comes to the efficient use of limited resources, then doesn't this mean that you would have to divert away from your resources to continue with the research and development into the existing technologies? I wonder, do you believe that that would be an efficient use of the limited resources?
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Yes, thank you for the very good questions. Now first, let me answer the question about the retention of talent.
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Now, once we get the regulatory approval within 2021, then the organization for the SSD business human resources would change. Based on our experience of smaller acquisitions of the past, the company is well aware that retention of the key talent would spell the success or failure of the acquisition.
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When it comes to the details of the retention plan, I must say that I'm not at liberty to divulge them, but then I can tell you that we do have mechanisms in place in the contract to have the retention of the key personnel. I can also further tell you that we will not rush into any premature consolidation and try to maintain the existing systems as much as possible so they will be able to ensure efficient management of the organization.
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To your second question about the efficient use of resources, again, an excellent question.
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In my presentation, I did explain that as part of the NAND business that we acquire, now this NAND business has its own cash flow and that can also be used to cover the investment that would be needed for the Dalian fab.
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One thing we have to take note of here is the kind of time, hard work, and resources that would require for the company to enter the high-end enterprise SSD market.
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If the company were to do this all by ourselves, then again, the kind of time, effort, and the resources needed, as well as the customer qualifications that we have to go through, and even after the customer qualifications, the work would have to continue to fight for the market share.
But then, through the acquisition this time and through the portfolio that has already been built, the company gets an immediate advantage of being able to address the high-end enterprise SSD market.
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Utilizing the charge-trap device technology of the company, we became the world's first to develop the 128-layer product and also the development work for the next generation products are underway. Utilizing this CTD based 128-layer product and combining that with Intel's outstanding eSSD solutions, the company now stands to offer a very competitive eSSD products to the customers. I would say that that is going to be the one big synergy effect coming from this acquisition.
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The following question will be presented by SK Kim from Daiwa Capital Markets. Please go ahead with your question.
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I would also like to thank the CEO for your detailed explanation. I also have two questions regarding the NAND business. First is about the acquisition and especially how you're going to finance the acquisition cost. I have read the CEO's media interviews where you appear to be quite conservative regarding the investment in Kioxia. I wonder what the company's plan is when it comes to financing the KRW 7 trillion that you will be needing by the end of next year. If you could give us more details about your financing plan. In relation to that, do you believe that there will be any changes in the shareholder return policy in relation to this acquisition this time? The second question is about demand market condition.
After the DRAM inventory adjustment, it appears as if there is going to be some demand rebound. Along with that, price rebound is expected in the first half of next year. For NAND also, for the server SSD, there is going to be a replacement cycle, also at the same time, the new capacity continues to run and also many players are now producing 96-layer, 128-layer. Also there are some concerns of oversupply at the same time. Can you just give us your outlook on the NAND market in terms of the supply demand dynamics?
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Now, the CEO will take the first question, and the second question will be taken by the person in charge of NAND Marketing.
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Yes, in my media interviews last week, I did mention that for the Intel NAND business acquisition, now this is an investment looking for the immediate benefits or the immediate advantages. For our investment in Kioxia, now it was more of a strategic investment that was made based on a longer medium to long-term perspective. Of course, I'm not completely ruling out the possibility, I believe that we would be thinking within the framework that I have explained earlier in the presentation. Regarding the shareholder return policy, there is already the medium-term dividend policy that the company has announced.
Of course, because of this recent change, there might be some concerns among the investors about how or whether this is going to affect them as a result of the company now having a larger asset base. We will make so now the impact from this deal this time is not going to be reflected into our calculation of the free cash flow. We will have further discussions at the BOD to make sure that it is done so.
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Now this is the CFO of SK hynix, and I would like to add a few more comments to what the CEO has just explained.
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The questioner was asking about our intent to utilize our share in Kioxia to finance the part of the acquisition cost for Intel NAND business.
Yes, utilizing our share in Kioxia can be one of the options to finance the acquisition. Again, as the CEO has explained earlier, our investment in Kioxia was made from a medium to long-term perspective. It was a strategic investment for that purpose. The acquisition of NAND business does not necessarily mean that we will be hurrying into disposing of our share in Kioxia to fund this acquisition. Even without our share in Kioxia, we are fully capable of financing the investment into the NAND business this time.
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Now I would like to respond to your question about the NAND market outlook as well as the supply and demand dynamics.
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Now the demand coming from mobile companies is continuing. For the purchase and build coming from the mobile companies, the demand continues. As they continue to fight over market share and also the 5G technology continues to spread, we believe that the demand for mobile products as well as demand from PC market will continue into next year. In the second half, from the server customers, because of their need to use up the inventory, there was some slower demand. We also see that demand is picking up from the server customers as well. Thanks to the demand trend per application, as I have just explained, we are expecting about high 20% level of demand growth this year. Also for next year, the expectation is about mid 30% level.
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Now when it comes to supply, now there can be various scenarios depending on several factors.
For example, right now there is the 128-layer, but then also the possible technological complexity involved with the further tech migration and also the investment, the need for investment into a new capacity as well as the timing for that. There would be various scenarios. Having said that, we do believe that the supply and demand will come to a stable dynamic sometime in the second half of next year for NAND.
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Given that uncertainties continue in the market, we will try to preemptively and also speedily respond to changes based on our stable product mix. For the supply-demand volatility, we would be conservative in our investment. For the conversion to the 128-layer as well as mass production of that, we will be more actively investing so that we will be able to utilize the 128-layer as the mainstream by the first half of next year.
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Based on this, we would continue to strengthen the company's influence on the major customers per application, and we would also continue to invest and develop the leading-edge technology so that we can also continue to have cost competitiveness.
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The following question will be presented by JJ Park from JPMorgan. Please go ahead with your question.
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I also have two questions. As the CEO has mentioned earlier, the Intel SSD. You would be having the initial closing next year for the Intel's NAND business and also the SSD. Currently the Intel's [3D] XPoint is 100% produced in Micron fab, and it is the other SSD that is produced in the Dalian fab. After 2021, after the first closing, then does this mean that for SK hynix's charge-trap NAND, this will be supplied to the customers utilizing the Intel SSD technology? Would that be the right understanding? Or will you be then moving on to the floating gate technology of Intel?
The second question is about the potential CapEx, because now there are some concerns about the acquisition cost for this acquisition, and there are some concerns among the investors that this could also affect the company's investment into your other businesses, especially in DRAM. Do you believe that such concern is warranted?
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Once again, thank you very much for the excellent questions. I did explain the meaning and the background as well as the plan for this acquisition in my presentation. Yes, the floating gate technology combined with the QLC or even PLC, we believe will be very well suited to enter the cold storage market. For the Dalian fab, we will be maintaining the direction that it is currently in. For the charge-trap type, yes, we would also be utilizing this technology to continue to develop the solutions from the SSD business. Having said that, before the closing is complete, we are still independently running our businesses as competitors.
Now after the acquisition is finalized, yes, utilizing charge-trap technology and to also continue to produce, utilizing the charge-trap technology for the solutions developed by Intel, yes, that is also one plan. Also for the Dalian fab, as I mentioned earlier, because this will be then well suited for the cold storage, this will be the focus segment for the Dalian fab. This basically means that for SK hynix, this will increase the addressable market for us.
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Regarding your question about the investment, particularly in DRAM business. Well, DRAM business itself has maintained quite a high level of cash generation capability so far. Depending on the market conditions, we would be implementing disciplined CapEx spending. A lot of this would be subject to the market conditions.
Right now we remain conservative in our CapEx, but again, we will be making our decisions subject to the market conditions as well as any changes from them.
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The following question will be presented by Jong-woo Yoo from Korea Investment & Securities. Please go ahead with your question.
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I also have two questions. First is about the company's outlook on the memory price in the fourth quarter of this year. It seems as if there is an expectation of a general recovery in demand. Can you just give us your outlook on the fourth quarter memory price trend, especially in comparison to the price trend in the third quarter of this year? The second question is the company's plan to utilize EUV, especially because your competitor is now planning to apply EUV for the DRAM production. What is the company's plan for deployment of EUV and also your equipment procurement?
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First, I would like to respond to your question about the DRAM price trend in the fourth quarter.
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Now, in the fourth quarter, as the inventory adjustment continues, especially for server side, we believe that demand will remain soft. As a result, the DRAM price will also remain weak continuing from the third quarter.
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As the CFO had explained earlier, from the bit perspective, we are planning to maintain over [mid-single digit ] shipment, to make sure that there would be no difficulties or challenges for the business.
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For the DRAM price, after remaining soft until the fourth quarter this year, we believe that it will stabilize in the first quarter of next year. On one hand, thanks to the demand that has been carried over from the fourth quarter of this year and also with the near completion of the inventory adjustment, especially on the server side. We believe that the price in the first quarter will be more stable than it is today or in the fourth quarter of this year.
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As for the NAND price in the fourth quarter, because of the sluggish demand for SSD, we believe that it will remain relatively weak in the fourth quarter, continuing from the third quarter. Starting in the first half of next year, we also believe that there is also going to be a general recovery on the back of stronger mobile demand.
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This is the CEO responding to your question about the EUV. The M16 is nearing completion by the end of this year. This is located in Icheon and in this M16 fab there is also a EUV only clean room ready and equipment will be moved in on schedule. We would be applying the EUV starting from the 10 nm 4th generation DRAM production. That would be the 1a nanometer. For this the development is currently well underway. When it comes to the knowledge or capability regarding the EUV equipment, we believe that we have built up sufficient knowledge and capability thanks to the EUV equipment that we have had in our research center.
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The following question will be presented by Doyeon Choi from Shinhan Investment. Please go ahead with your question.
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I also have two questions. You did explain about your price for projection. Can you also give us more information about the inventory level that would be the basis of your price forecast? If possible, can you give us the company's current inventory level by DRAM and NAND? If possible, can you also give us an estimate of the customer's inventory level? The second question is about the DDR5, which we believe will be starting to be supplied in full starting next year. When does the company expect that you will be able to reach a meaningful volume shipment for DDR5? What is going to be the company's strategy for the DDR5 market?
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First about the NAND inventory. At the end of the third quarter, given the increase in the production of 128-layer, our inventory level increased slightly quarter-on-quarter to around mid three-week level. Looking toward the year-end, then again, because of the increased share of the 128-layer production and also, thanks to higher productivity, we believe that the inventory level will remain slightly up, but considering also the sell-through, we believe that it will remain stable at around three-week to four-week level.
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As for the DRAM inventory, at the end of the third quarter, which is also similar for the start of the fourth quarter, the DRAM inventory level for the company at this moment is slightly below two-week level.
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Regarding the customer's inventory level, of course, you understand that we cannot be specific about that. I would say that it would be largely in line with the market's view. For the server, in the fourth quarter and also going into the first quarter of next year, there would be some inventory adjustments by the customers. We believe that it will become a bit lower than it is now, but also for the mobile side, because of the continued U.S.-China tension and also with many of the Chinese companies fighting for market share, it's likely that there is going to be growth in the inventory level on the mobile side.
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Next about the DDR5. We are starting the sampling to server customers in the fourth quarter of this year so that we can be ready for the customer qualification. This work is currently underway smoothly. Also, as we have announced in the press release at the early part of the quarter, we will be continuing our close cooperation with the leading SoC companies.
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Now from the market perspective, what we call meaningful volume perhaps will be in 2022 as we expect the market to really take off around that time. For the bit cross with DDR4, we expect this to occur sometime in 2023. Now, for next year, we would be getting ready for the market's evaluation in the first quarter of 2022. By the second half of that year, we would also be increasing our supply for the customer's pilot production.
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The following question will be presented by Nicolas Gaudois from UBS. Please go ahead with your question.
Good morning. Thanks for taking my question. Going back to the NAND flash business in the context of the Intel NAND acquisition Dalian is going to bring you, give or take 70,000 wafers per month of capacity eventually. Does this imply that you would likely slow down the ramp-up of M15 next year for hynix's NAND flash capacity, or this has essentially no influence on that trajectory, in your opinion, at this stage? Secondly, you talked about end demand in bits for NAND flash. Could you give us your updated view on DRAM for this year and next year? Whether within that you see customers starting to be concerned a little bit about supply for DRAM and therefore engaging in long-term agreements. Thank you.
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Now, this is the CEO responding to your first question. As I have mentioned earlier, the Intel business and the company's business, between the two business, when we look at the portfolio of the businesses, we see that there is almost no overlap between the two. The production in Dalian will continue and also the technological development for the next two to three generations of extension will also continue. On the other hand, the investment into M15, this is where the charge-trap type NAND is being produced. The investment decisions on the M15 will largely depend on the market circumstances as well as the product mix. To answer your question directly, the acquisition this time will not have an impact on any dramatic changes in the fab capacity.
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Yeah, regarding your question about DRAM supply as well as the LTAs.
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For the fourth quarter of this year, as I have explained earlier, we are planning for a bit growth of mid-single percentage.
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Actually, there is also the likelihood of this increasing a little bit thanks to the demand coming from the mobile customers, as well as the preparation for the future being made by the server customers.
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In giving our projection for the supply for next year, I would like to link this to our overall forecast of the market.
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First for the smartphones, as again was mentioned earlier, because of the competition over market share among the different players, we believe that there is going to be strong demand in the first half.
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For the server demand, yes, there is the inventory adjustment for the time being. So many say that the cloud company's business expansion continues. Also in the recent earnings release calls by the IT companies, they have all emphasized the digital transformation accelerating under the COVID-19 pandemic. Also they have emphasized a need by the providers to respond strongly to such a stronger demand. We do believe that there would be stronger demand for a multi-cloud or a hybrid cloud, which also means that the demand coming from the server side will also become stronger.
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Then looking toward next year overall, then, depending on the pace of economic recovery and depending on the pace of demand growth, we believe that the demand bit growth is likely to be in the high teen level or up to 20% level. Also at the same time, because the production capacity, we believe that the production capacity next year will be limited because of the conservative investment trend of this year. This means that for some applications or some products, the supply shortage might actually occur after the second quarter of next year.
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Now, for the company, we are planning for a mid-teen percent bit growth for DRAM next year. Also, depending on the mix by application, we will try to proactively respond to the demand coming from the different applications. As for the LTA, thanks to the quality competitiveness that has been proven by the market as well as the customers, we were also able to just about complete the discussions for LTAs for next year. I can tell you that the share of LTA next year is going to slightly increase.
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The following question will be presented by Hyun-Woo Doh from NH Securities. Please go ahead with your question.
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I also have two questions. First, regarding the U.S. government sanctions against Huawei, I understand that SK hynix has requested export license from the U.S. government. Can you give us a progress update on that front? My second question is to the CEO. We see that in looking at the supply and demand dynamics, it seems as if the memory cycle has become shorter compared to the two years of before. It appears that it is only one year. What do you see as the drivers of such shorter cycle, and what is the company's plan to respond to this change?
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First regarding the license for the Huawei export. As you already know that SK hynix has already requested the license that is necessary for our business with Huawei, and we have requested the license from the U.S. government. Regarding that particular topic, please understand there is really no progress update that we can give you at this point.
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Yes, about the memory cycle, once again, a very good question, so thank you for that. Yes, the memory cycle becoming shorter from two to one year. Why the shorter cycle? Well, I would point to first of all, the continuous technological development, perhaps also more disciplined CapEx operation in the face of uncertainties. Because of this, we also see that the supplier's bit growth continues to fall every year. Another possibility is a more advanced supply chain management within the industry. I believe that it is a combination of these factors that have perhaps led to the shorter memory cycle. As to the company's response to this, our response will not be too much away from what is going on in the market already.
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That brings us to the end of the Q&A session. We will conclude the SK hynix Q3 2020 earnings release conference call with the CEO's closing comments.
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On my first day as the CEO in 2019, I have stated to the members of SK hynix my goal of achieving corporate value of KRW 100 trillion. Now, I think we are on the verge of a new turning point where we can accelerate our achievement of that goal.
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We now have an opportunity to accelerate revenue growth and improve profitability for our NAND business, just like the DRAM business, which unlike the past, is now able to generate profits despite any economic fluctuations. The expected synergy effects from this acquisition will bring both economic and social values to not only benefit the global ICT industry, including our customers and partners, but also all the stakeholders, including our shareholders, local communities, and the members of SK hynix.
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Amidst a global pandemic, sustainability has become an important topic, not only for enterprises, but for the world. One of the key issues among sustainability is the dramatic climate change, which is being brought up as a critical matter threatening the very survival of humankind. Therefore, the company has decided to join RE100 in order to proactively respond to this crisis, as we believe more contribution is needed beyond merely emphasizing with its seriousness. The company aims to secure all of its power consumption in renewable energy sources by 2050.
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Meanwhile, it is notable that the general SSDs and low power consumption SSDs consume 50% and 94% less power than HDDs, respectively. If all HDD-based storage in global data centers were to be replaced by low power SSD in 2030, carbon dioxide emission could be reduced by 41 million tonnes, which is estimated to create the equivalent of over KRW 4.2 trillion of social value. The company will try to realize such social value by driving the conversion towards SSD in the data storage market.
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Given that sustainable growth cannot be achieved by creating economic value alone, especially in this changing environment, SK hynix will also create social value with ESG management. As we are now poised to take flight as a true global memory company with a pair of strong and balanced wings, DRAM and NAND, I hope for your continued interest and support as we try to recreate the miraculous turnaround story of DRAM, this time in NAND. Thank you.
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That concludes the closing remarks and the earnings release conference call. Thank you very much.