SK Hynix is moving to restructure its long-term supply agreement (LTA) framework. The company said on April 23 in its first-quarter 2026 earnings conference call that it is reviewing "structural alternatives in a new format". The contract changes are seen as an attempt to change how the memory industry itself is valued, beyond a simple sales strategy.

SK Hynix posted first-quarter 2026 revenue of 52.5763 trillion won and operating profit of 37.6103 trillion won, breaking 50 trillion won in quarterly revenue for the first time. Revenue rose 198 percent from a year earlier and operating profit jumped 405 percent. Operating profit was about double the previous quarter, and net cash reached 35 trillion won.

Kim Woo-hyun (김우현), SK Hynix CFO, said on the call that customers are seeing securing volumes as a bigger risk than price, driving a surge in requests to secure mid- to long-term supply. He said the company is reviewing structural alternatives that provide supply stability for customers and a stable profit structure for the company. He added that it will reduce the memory industry's inherent volatility and lift the market's assessment by one level.

It is unusual for a supplier in the memory industry to formally declare a redesign of contract terms led by the supplier. While existing LTAs have largely functioned as price-hedging tools, the new contract structure is likely to be reorganised around securing volumes first.

A structural supply-demand imbalance underpins the review of an LTA overhaul. The company forecast on the day that shortages of HBM (high bandwidth memory), server DRAM and eSSD (enterprise solid-state drive) will be difficult to resolve in the short term, and that a price upcycle will last longer than in the past.

The company cited investment cuts by suppliers during past downturns and a lack of available space as factors constraining short-term output increases. On weak spot prices, it said the spot market is a very small part of the overall market and cannot represent supply-demand conditions, drawing a line by calling it a temporary adjustment.

That assessment is reflected in the pace of production infrastructure investment. SK Hynix decided to bring forward the start of operations at the Yongin cluster Phase 1 fab to February 2027, three months earlier than planned. With the ramp-up of Cheongju M15X, preparations for Yongin cluster infrastructure and securing EUV (extreme ultraviolet) equipment coming together, investment this year is expected to rise sharply from last year. The company stressed that securing supply capacity has emerged as a key competitive edge in an environment where customer demand exceeds supply capabilities.

In HBM, preparations for mass production of HBM4, the sixth-generation product, have moved into full swing. The company said it is working closely with key customers from the early stages, and is preparing to supply samples in the second half and target mass production in 2027. It said demand requested by customers over the next three years already far exceeds its supply capabilities.

On concerns over oversupply stemming from competitors' capacity expansions, the company said investment based on demand visibility is a firm principle, and judged that the risk of indiscriminate expansion like in the past is not large. As a differentiation strategy for HBM4E (seventh generation), it proposed base-die optimisation and application of a 1c nanometre process. It said it has already secured mass-production capability for the 1c process at a mature stage.

◆NAND redefined as a computing component…accelerating shift to 321-layer QLC

Its NAND strategy is also placed in the same context as the LTA restructuring. Song Chang-seok (송창석), in charge of NAND marketing, said NAND is no longer a simple storage device but a key component that determines computing efficiency. He said the company will convert more than 50 percent of its domestic production volume to 321 layers by the end of this year to maximise productivity. It aims to expand dominance in high-performance eSSD by leveraging synergies with Solidigm in AI data centres and the AI PC storage market. The company also began supplying its cSSD PQC21, which applies 321-layer QLC technology based on CTF (charge trap flash).

The next-generation product lineup has also taken shape. The company said it began mass production this month of LPDDR6 and 192GB SOCAMM2 using a 10-nanometre-class sixth-generation (1c) process, and will move to secure leadership in new markets with a second-generation product based on CXL 3.0. In NAND, it plans to lead global standardisation of HDF (high bandwidth flash), a 3D stacking technology. It will respond to AI demand with a lineup across the full eSSD range that spans high-performance TLC (triple-level cell) and large-capacity QLC (quadruple-level cell).

If the LTA restructuring is put into practice, changes could follow in the logic used to value the memory industry. SK Hynix submitted an application for confidential registration of an ADR listing to the U.S. Securities and Exchange Commission (SEC) on March 24 and is pursuing a listing this year.

There is an observation that if efforts to reduce earnings volatility through contract-structure changes align with an ADR listing, it could partially ease the cyclical discount factors that have been applied to memory makers. Reduced earnings visibility due to cycle swings has been cited as a factor that has weighed on stock price multiples of memory makers at home and abroad.

Details of the LTA restructuring plan have not emerged. The company has also presented a plan to prepare measures this year to expand shareholder returns, and dividends and share buybacks and cancellation are expected to be discussed in the future as items under review. An SK Hynix official said the company will strategically expand its production base to proactively respond to mid- to long-term demand growth, and will secure supply stability and financial soundness together through investment that considers demand visibility.