SK Hynix Pushes Deeper Into Custom Chips as TSMC Alliance Tightens

The numbers coming out of SK Hynix are the kind that reshape how investors think about memory makers. The South Korean chip giant posted a net profit of roughly $27 billion for the first quarter of 2026, a 400 percent surge from a year earlier, as revenue nearly tripled to over $35 billion. The operating margin hit 72 percent — a figure that would make most software companies envious.

That pricing power comes straight from the company’s stranglehold on high-bandwidth memory (HBM), the specialized chips that feed data to AI accelerators. SK Hynix controls more than half of that market and has raised prices for its HBM3E products by up to 20 percent this year. The next generation of chips is already sold out through long-term contracts.

Management sees supply trailing demand for at least three more years, a forecast that prompted Nomura to lift its price target by 21 percent to 2.34 million won. The analysts pointed to excellent earnings prospects and the potential for long-term supply agreements that would lock in fat margins.

Engineering a New Bottleneck Solution

The company is not resting on its production lead. At TSMC’s North America Technology Symposium, SK Hynix laid out plans for a deeper integration with the Taiwanese foundry giant. The upcoming HBM4 design will marry a 12-nanometer base die from TSMC with the company’s fifth-generation memory chips, effectively fusing logic and DRAM manufacturing.

This approach tackles a fundamental constraint in modern AI systems: the data transfer bottleneck between processor and memory. By moving away from standard off-the-shelf products toward customized memory solutions for specific workloads, SK Hynix is trying to make itself even harder to replace.

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The engineering community took notice. Last Wednesday, the company received the IEEE Corporate Innovation Award in New York, with the industry group specifically citing its reliable mass production across all HBM generations.

Competition Stumbles, Government Steps In

While SK Hynix presses ahead, rival Samsung faces a potential disruption. An 18-day strike threatens to hamper operations there starting at the end of May, even as the company plans billions in new investment. That labor trouble only strengthens SK Hynix’s position as the preferred supplier to Nvidia and other AI chip designers.

The South Korean government is also backing the domestic semiconductor sector with a massive investment program, providing an additional tailwind.

Stock Still Has Room to Run

The market has already priced in much of the good news. Shares closed Friday at 1,222,000 won, barely below their 52-week high, with a year-to-date gain of roughly 80 percent. But analysts see further upside: the consensus price target of about 1.66 million won implies another 36 percent advance from current levels.

The strategic priority for the months ahead is clear: rapidly expand production capacity to work through the enormous order backlog. One wild card could disrupt that plan. A potential global helium shortage — helium is a critical input for semiconductor manufacturing — might slow the ramp-up of the next HBM generations. For now, though, SK Hynix is riding a wave that shows no signs of cresting.