SK Hynix's investment in Kioxia (formerly Toshiba Memory) made eight years ago is bearing fruit, with projections indicating that pre-tax profit will exceed 100 trillion won for the quarter. The milestone of surpassing 100 trillion won in pre-tax profit results from a strong performance in the memory semiconductor business led by HBM (high-bandwidth memory), combined with approximately 40 trillion won in investment recovery gains classified as non-operating income. If this figure materializes, it will set a new record for the largest quarterly result among all KOSPI-listed companies.
According to industry sources on the 28th, SK Hynix's estimated pre-tax profit ahead of its second-quarter earnings announcement on the 29th significantly exceeds market expectations. Meritz Securities forecasts SK Hynix's second-quarter operating profit at 60.1 trillion won and pre-tax profit at 101.8 trillion won. This figure substantially surpasses the market consensus estimate for pre-tax profit of 69 trillion won, reflecting large non-operating gains from the recovery of the Kioxia investment.
In fact, it is estimated that approximately 40 trillion won in non-operating income will be generated, including gains from the sale of stakes in Kioxia and valuation gains on convertible bonds. Pre-tax profit represents earnings after reflecting non-operating income and expenses in operating profit but before deducting corporate taxes. This forecast combines core business operating profit with non-operating gains related to Kioxia.
In 2018, SK Hynix invested approximately 3.9 trillion won in Kioxia through a consortium led by Bain Capital involving South Korea, the United States, and Japan. The investment was structured as equity participation via special purpose vehicles (SPC1 and SPC2). Of this amount, approximately 2.6371 trillion won was invested in an equity acquisition fund, while approximately 1.2789 trillion won was invested in convertible bonds. At the time, Kioxia was a leading company in the global NAND flash market, tracing its origins to Toshiba's memory business division. SK Hynix secured a foundation for NAND business cooperation by joining the consortium rather than acquiring directly.
As AI data centers expanded and demand for enterprise SSDs (solid-state drives) increased, Kioxia's corporate valuation surged sharply. With the sale of SPC1 stakes completed last month, cumulative investment gains of approximately 40 trillion won are estimated to have been recognized. Additionally, valuation gains from SPC2 were reflected in the same quarter, resulting in substantial non-operating income.
SK Hynix's past investments related to NAND are being reflected in earnings through different mechanisms. Solidigm, established following Intel's acquisition of its NAND business division, is contributing to strengthening NAND competitiveness based on its competitive edge in enterprise SSDs (eSSDs). In contrast, the Kioxia investment is reflected as gains from stake sales and valuation adjustments classified as non-operating income.
The core memory business also maintains a robust trend. Market research firm TrendForce forecasts that second-quarter contract prices for general-purpose DRAM will rise by 58% to 63% compared to the previous quarter, while NAND flash prices are expected to increase by 70% to 75%. This price surge across general-purpose products occurred as demand from AI servers and data centers rapidly absorbed memory supply. Additionally, there is a trend toward expanding the share of high-performance products including HBM.
A semiconductor industry executive stated, "This case is significant because SK Hynix's investment portfolio accumulated over eight years has converged with the AI memory boom to generate financial results all at once." The executive emphasized that as a structure where both core business competitiveness and past investment performance are simultaneously reflected in earnings, the role of the investment portfolio will become increasingly important in future corporate valuation assessments.
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