SKHY Spot and Perp Total Returns

Quarter in one view

• Q2 2026: the supercycle compounded again. Revenue KRW79.3trn (+51% QoQ, +257% YoY) — second consecutive record. OP KRW60.5trn (+61% QoQ, +557% YoY); OPM 76% (+5pp QoQ, all-time high). D&A KRW4.0trn; EBITDA KRW64.6trn (81% margin); pre-tax KRW122.7trn; net KRW93.9trn (118% net margin).
• Both guides hit; ASPs decelerated but stayed extreme. DRAM bits +high-single-digit QoQ (as guided); DRAM ASP +~30% QoQ (vs +mid-60% in Q1 — sharp deceleration, and Daiwa flagged it as below market expectations). NAND bits +mid-teens QoQ (as guided); NAND ASP +mid-50% QoQ (vs +mid-70%). eSSD revenue doubled QoQ; Solidigm ≥30TB eSSD revenue more than tripled QoQ.
• Earnings quality distortion went from large to dominant. Non-op +KRW62.2trn, including KRW63.3trn from sale/valuation of investment assets (Kioxia stake sale confirmed in Q&A) plus KRW1.1trn FX gains. Net profit (93.9trn) exceeds operating profit (60.5trn) by 55% — the majority of the headline print is one-off.
• Balance sheet: cash incl. ST investments KRW88trn (+33.6trn QoQ); debt KRW18.6trn (-0.7trn); net cash KRW69.4trn (from 35trn — 69% of the way to the >100trn target in one quarter); D/E 7% (from 12%).
• Capex finally quantified: 2026 capex "high KRW40 trillion range" — the first absolute figure in at least six quarters, driven by M15X pull-forward and Yongin Fab 1 (early 2027 cleanroom). New announcements: P&T7 (advanced packaging), M17 (new NAND fab), and a new domestic cluster beyond Yongin.
• ADR executed: listed on Nasdaq July 10; described as the largest-ever US IPO by a foreign company. Conversion limit 17,790,000 shares.
• Q3 2026 guide: DRAM bits +~10% QoQ; NAND bits +low-single-digit QoQ. No ASP guidance.

What management is focused on

• Defending AI-capex durability against a new bear angle. The opening question (J.P. Morgan) raised data-center leasing and efficient models as slowdown risks. Management reframed both as utilization/monetization transitions, citing "explosive demand for recent high-efficiency AI models" and customer conversations supporting investment "beyond next year." Same structural-demand defense as prior quarters, now aimed at a different threat.
• LTA architecture disclosure — the biggest new information on the call. ~10 customers signed (including key customers); typical term ~5 years; non-uniform pricing mechanisms designed to damp volatility; deposits incorporated to enforce purchase commitments and improve demand visibility. LTA share of total sales deliberately undisclosed ("appropriate level"). This is the evidentiary backbone of the no-oversupply claim.
• HBM4 execution narrative restored. Mass production shipments began in Q2 for key customers; yield and quality "nearing HBM3E levels" (HBM3E described as mature); full ramp in H2. This directly answers last quarter's language-drift concern.
• Capacity expansion as competitive duty. M15X mass production pulled forward; Yongin Fab 1 early-2027 cleanroom followed by rapid capacity build-out; P&T7 packaging and M17 NAND announced; new domestic cluster beyond Yongin — a reversal of last quarter's flat "no plans" for fabs beyond Yongin. Overseas expansion left open ("no further decisions"), with site selection framed around power, water, talent, supply chain, customer access.
• Shareholder returns still deferred. "Various options" under evaluation; specifics blocked by ADR-related regulatory constraints; communication promised "within the year" — same deadline as last quarter, now with a regulatory rationale.

Key numbers and quarter mechanics

• P&L: revenue 79.3trn (+51% QoQ, +257% YoY); OP 60.5trn (76% OPM, +5pp QoQ); D&A 4.0trn; EBITDA 64.6trn (81%); non-op +62.2trn (investment-asset sale/valuation +63.3trn, FX +1.1trn); pre-tax 122.7trn; net 93.9trn (118% margin).
• Volumes/ASP: DRAM bits +HSD QoQ (in line); DRAM ASP +~30% QoQ — management attributed the below-expectation print to high-value product shipments pushed into H2 and mix effects, and guided H2 bit growth above H1 with HBM4 and 1cnm mix lifting blended ASP. NAND bits +mid-teens QoQ (in line, off Q1's low base); NAND ASP +mid-50% QoQ.
• Mix detail: sales centered on HBM3E and AI server DRAM; server LPDDR incl. SOCAMM2 "grew significantly"; eSSD revenue 2x QoQ; Solidigm ≥30TB eSSD revenue >3x QoQ.
• Demand outlook: 2026 DRAM demand +mid-20%, NAND +high-10s (bit growth); supply-demand balance unlikely to improve near-term due to process complexity and fab lead times.
• Q3 guide: DRAM bits +~10% QoQ (server-led); NAND bits +LSD QoQ — a notable NAND deceleration vs Q2's mid-teens.
• Balance sheet/capex: cash 88trn; debt 18.6trn; net cash 69.4trn; D/E 7%; 2026 capex high-40trn range.
• PC/mobile: "temporary sales adjustments due to difficulties in securing memory" — the framing shifted from demand destruction (Q1: cost-pressure shipment cuts) to supply starvation; recovery expected as shortage eases.
• Persistent gaps: no DRAM/NAND revenue split, no HBM revenue/mix, no segment margins, no LTA coverage ratio, no HBM pricing detail, no Kioxia gain mechanics.

Product and launch scorecard

• HBM4: mass production shipments began Q2 for key customers; yield/quality "nearing HBM3E" levels; full ramp H2 2026. Clears last quarter's "getting ready to ramp" ambiguity — the strongest execution evidence on the call. Still no volume, share-of-HBM, or customer-breadth quantification.
• HBM4E: samples delivered to a major customer in H1 (ahead of the prior "H2 2026 samples" timeline); built on a mature, proven process; volume production targeted 2027.
• iHBM (new disclosure): in development for HBM5-era thermal management; cooling elements integrated in-package; >30% thermal-resistance reduction claimed. Pre-product but a concrete differentiator alongside hybrid bonding.
• SOCAMM2 (1cnm): full supply commenced in Q2; server LPDDR sales "grew significantly"; sample shipments planned to broaden the customer base beyond the initial platform.
• 321-layer NAND: became the largest share of NAND production in Q2; ~50% of domestic capacity by end-2026 reiterated ("as planned").
• NAND AI-storage strategy: portfolio framing across TLC eSSD, high-capacity QLC eSSD (data lake/HDD replacement), and SLC-mode high-performance SSDs; new tiers for KV-cache offload and near-GPU storage in development. Solidigm's ≥30TB momentum (>3x QoQ) is the first hard revenue evidence for the QLC/HDD-replacement thesis.
• 2027 HBM pricing: negotiations underway, "progressing smoothly"; management explicitly linked HBM pricing to sharply higher conventional DRAM prices plus resource/opportunity cost of HBM production — an analyst-readable signal that 2027 HBM pricing is being negotiated up, not down.
• Quiet/dropped threads: LPDDR6 flagship win not mentioned; CXL, HBF, PQC21 not mentioned; 245TB eSSD, GDDR7, LPDDR server module, OpenAI LOI, tariffs, China/VEU all still absent.

Sell-side read-through

• Jay Kwon (J.P. Morgan): AI-capex slowdown risk (leasing, efficient models) — the cycle-longevity question has evolved from spot-price softness to hyperscaler capex behavior. Management's answer was emphatic and customer-cited but number-free.
• Rok-ho Kim (Hana): basis for long-term demand and oversupply risk — got the LTA-anchored demand-visibility defense and "phased, flexible" execution pledge. "Will not lead to oversupply right away" is a carefully qualified version of last quarter's stronger claim.
• Sunwoo Kim (Meritz): LTA terms — extracted the call's most valuable disclosures: ~10 customers, ~5-year typical terms, deposits, non-uniform pricing. Coverage ratio refused.
• SK Kim (Daiwa): the only challenging question — DRAM ASP +~30% "fell below market expectations." Management blamed H2-pushed high-value shipments and mix, and guided H2 bit growth above H1 with mix-driven ASP recovery. A plausible but unverifiable explanation; it concedes Q2 blended ASP was mix-depressed, not price-depressed.
• Dong-hee Han (SK Securities): HBM competitive moat vs fast-progressing rivals — produced the yield-nearing-HBM3E claim and the iHBM reveal. Competition anxiety is now explicit in the question set.
• Nicolas Gaudois (UBS): 2027 HBM pricing for HBM3/4/4E — got direction (constructive, conventional-DRAM-linked) but no terms, as expected.
• Sanjeev Rana (CLSA): overseas expansion (US/Japan) — door opened ("no domestic/overseas distinction in principle") but nothing decided.
• Hyung-geun Ryu (Daishin): NAND segmentation (QLC vs SLC-mode) — portfolio answer, no product specifics or customer names.
• Young-ho Ryu (NH): ADR fungibility — one-way conversion initially (ADR→stock free from July 30; stock→ADR limited by filings and the 17.79mn-share cap); no decision on expanding the program.
• Su-rim Lee (DS): capital allocation post-Kioxia/ADR — returns still "within the year," now with an ADR regulatory gag as the stated reason for no specifics.
• Notable absences: no question on the KRW63.3trn one-off gain dominating the print (third straight quarter of unexamined non-op swings); no HBM4 share/volume quantification demanded this time; no tariff, China, or OpenAI questions; no challenge on the NAND Q3 guide decelerating to LSD.

Management credibility

• Positive: guidance hit on both axes again. DRAM +HSD, NAND +mid-teens — both as guided. The bit-guidance track record is now four-plus quarters clean.
• Positive: HBM4 language-drift resolved by delivery. Last quarter's "getting ready to ramp" became "mass production shipments began in Q2" with yields nearing HBM3E — the softening was scheduling, not execution. HBM4E samples also landed ahead of the stated H2 window.
• Positive: capex opacity ended. High-40trn 2026 figure after six quarters without a number; M15X pull-forward and Yongin timeline give it structure.
• Positive: LTAs moved from "structural options under review" to ~10 signed deals with disclosed architecture (5-year terms, deposits) — real progress on the prior quarter's key watch item, though coverage and pricing remain undisclosed.
• Mixed: ASP explanation under pressure. The below-consensus DRAM ASP was attributed to mix and shipment timing — consistent with the HBM4 H2 ramp story, but it means Q2's headline ASP strength was partly portfolio optics, and the H2 recovery claim is now falsifiable.
• Negative: headline earnings are now mostly non-operating. Net margin 118% vs OPM 76%; KRW63.3trn of one-off gains in a 93.9trn print. Management presented the net figure without flagging its composition beyond the line-item disclosure, and no analyst probed it.
• Negative: shareholder returns slipped again in substance. Same "within the year" promise as Q1, now with a regulatory constraint attached — the ADR process has become a reason for continued deferral while net cash piles toward 100trn.
• Watch: reversal on fabs beyond Yongin. Last quarter: "no plans." This quarter: new domestic cluster announced plus openness to overseas sites. The change is explained by demand, but it is a genuine strategic U-turn within one quarter.

What changed versus the prior quarter

• ASP momentum decelerated hard while volumes re-accelerated: DRAM ASP +~30% (vs +mid-60%), NAND ASP +mid-50% (vs +mid-70%); DRAM bits +HSD and NAND bits +mid-teens (vs flat/-10%). The quarter was more volume-real than Q1 — and Q3 guides DRAM +~10%, the strongest bit guide of the cycle.
• HBM4 crossed from preparation to revenue: Q2 mass-production shipments, yields nearing HBM3E, H2 full ramp; HBM4E sampled early. Last quarter's central credibility question was answered.
• Capex went from "increase significantly" to high-40trn, with M15X pulled forward and three new capacity announcements (P&T7, M17, post-Yongin cluster). The investment supercycle is now matching the price supercycle.
• LTAs became concrete: ~10 customers signed, ~5-year terms, deposits, volatility-dampening pricing — vs "various approaches under review" in Q1.
• ADR completed: Nasdaq listing July 10, largest foreign-company US IPO; fungibility mechanics disclosed.
• Earnings quality deteriorated from caveat to distortion: non-op gains 14trn → 62.2trn; net margin 77% → 118% vs OPM 72% → 76%. The Kioxia sale is new information explaining the jump.
• PC/mobile narrative flipped: from demand destruction (cost-pressure shipment cuts) to supply starvation ("difficulties securing memory") — a friendlier framing that implies deferred, not destroyed, demand.
• New disclosures: iHBM (>30% thermal-resistance reduction, HBM5-era); 321-layer now the largest share of NAND output; 2026 demand growth forecasts (DRAM +mid-20%, NAND +high-10s); 2027 HBM pricing talks underway with conventional-price linkage.
• Dropped/quiet: LPDDR6, CXL, HBF, PQC21, tariffs, OpenAI LOI, China/VEU, 245TB eSSD, GDDR7.

Bull case

• The cycle is now volume-led, not just price-led: Q3 DRAM bit guide of +~10% with HBM4 ramping and 1cnm conventional mix rising implies H2 revenue growth even if conventional ASP momentum flattens. Management explicitly guided H2 bit growth above H1 with mix-driven ASP improvement.
• HBM execution risk is de-risked: HBM4 in mass production at near-mature yields, HBM4E sampled early, 2027 pricing talks "progressing smoothly" with conventional-price tailwinds, and iHBM extending the roadmap into HBM5.
• Demand visibility is now contractual: ~10 five-year LTAs with deposits convert the no-oversupply argument from assertion to structure — and give management a rational basis for the high-40trn capex and post-Yongin cluster.
• NAND has a second engine: eSSD revenue doubling QoQ and Solidigm ≥30TB tripling is the first hard evidence that AI-inference storage (QLC HDD replacement, KV-cache offload) is a revenue line, not a slide.
• Balance sheet is a fortress: 69.4trn net cash, 7% D/E, 81% EBITDA margin — the 100trn net-cash target is reachable within quarters, and the ADR broadens the investor base into it.
• PC/mobile weakness reframed as supply starvation implies pent-up demand that returns when supply eases — upside to the +mid-20% DRAM demand forecast rather than downside.

Bear case

• The headline print is mostly one-off. Strip the KRW63.3trn investment gains and Q2 net profit is roughly half the reported 93.9trn; net margin of 118% is not an earnings-power data point. Three straight quarters of large unexamined non-op items make reported net income nearly useless for trend analysis.
• DRAM ASP missed expectations, and the explanation (mix, H2-pushed shipments) concedes that blended pricing power is now hostage to HBM4 ramp execution. If the H2 mix recovery doesn't materialize, the ASP deceleration (+mid-60% → +30%) will look like the start of normalization, not a timing artifact.
• NAND momentum is already fading in the guide: Q3 bits +LSD after +mid-teens, with no ASP guide — the eSSD surge may be lumpy.
• Capex is escalating aggressively at peak margins: high-40trn in 2026 plus M15X acceleration, M17, P&T7, and a post-Yongin cluster — a strategic U-turn from "no fabs beyond Yongin" one quarter ago. If the LTA-anchored demand visibility proves softer than claimed, this is exactly how past oversupply cycles were built.
• Shareholder returns remain a promise, not a policy: two consecutive quarters of "within the year," now gated by ADR regulatory constraints, while cash accumulates and reinvestment is prioritized.
• Competitive anxiety is rising (explicit HBM-moat question), and management's answer rested on track record rather than quantified current share, qualification breadth, or 2027 volume commitments.
• Still unexamined: tariffs, China/VEU, OpenAI LOI, customer concentration, LTA pricing floors/caps, and the terms under which deposits could be forfeited.

Next-quarter watchlist

• H2 mix-recovery claim: whether HBM4 ramp and 1cnm conventional shipments deliver the promised H2 bit growth above H1 and blended-ASP improvement — the direct test of the Q2 ASP-miss explanation.
• Q3 delivery vs guide: DRAM bits +~10%, NAND bits +LSD; whether NAND's deceleration is timing or eSSD lumpiness; any ASP commentary as 2027 contract talks progress.
• HBM4 quantification: share of HBM revenue, customer count, and whether 2027 HBM pricing concludes with disclosed direction; HBM4E development milestones toward 2027 volume production.
• LTA conversion and coverage: additional signings beyond ~10, any disclosure of sales coverage ratio, deposit magnitudes, or pricing-mechanism structure — and whether deposits show up in the balance sheet.
• Shareholder-return plan: the twice-promised "within the year" framework — size, recurrence, mix — now that the ADR regulatory window is the stated constraint; watch whether the constraint outlives the lockup period.
• Capex trajectory: whether high-40trn holds or rises; M15X ramp contribution; Yongin Fab 1 early-2027 cleanroom on schedule; any overseas-site decision following the opened door.
• Earnings quality: Q3 non-op composition post-Kioxia; whether net margin re-converges toward OPM; any remaining investment-asset stakes that could produce further one-offs.
• SOCAMM2 and Solidigm traction: customer-base expansion via samples; whether ≥30TB eSSD growth sustains after a 3x quarter; 321-layer progress toward ~50% of domestic capacity by year-end.
• PC/mobile: whether "supply starvation" framing holds or demand destruction re-emerges; any LPDDR6 flagship evidence.
• Overdue items: tariff strategy (two quarters past the promised update), OpenAI LOI, China/VEU, LPDDR6/CXL/HBF status, 245TB eSSD, GDDR7, LPDDR server module.