We shift SK Hynix back to Market perform from Outperform following its strong 3Q25 results; the company reported an acceleration in topline growth thanks to an improvement in DRAM and NAND pricing, as well as strong DRAM shipments, higher EBITDA margin on a better product mix, free operating cash flow expansion, and it turned net cash during the quarter. We remain constructive on SK Hynix credit outlook for the next 15 months, and expect the company to further expand its net cash position. That said, we think its current spreads have priced in its constructive credit outlook and positive rating agencies by all three rating agencies, as it now trades tighter than Asia BBB+ corporates and Micron.

• SK Hynix is one of the world’s largest memory semiconductor companies. As an Integrated Device Manufacturer (IDM), it engages in the design, manufacturing and sale of advanced memory semiconductors. It derives 78% of 3Q25 revenues from the sale of DRAM (dynamic random-access memory), 20% from NAND Flash, and the remaining 2% from CMOS Image Sensors and foundry services. The company's products are essential to a wide range of electronic devices, including PCs, servers, graphic cards, and mobile devices.
• SK Hynix holds the largest global market share (3Q25: 34%) in DRAM and second largest in NAND Flash (3Q25: 22%).
• SK Hynix is a member of SK Group, South Korea's second largest conglomerate by asset, and is 20.1%-owned by SK Square.
• The company has manufacturing facilities located in (1) South Korea — Icheon (DRAM, NAND), and Cheongju (NAND); and (2) China — Wuxi (DRAM), Dalian (NAND); and packaging & testing facilities in Chongqing, China.
• SK Hynix had a market capitalization of KRW 494.3 tn as of 2 Jan 2026.

• The memory sector is subjected to significant boom/bust cycles, leading to volatility in its revenue and EBITDA margin. During an upcycle, memory vendors typically expand capacity to meet strong end-demand from PC, smartphones, and servers; however, the long-lead time for new plants could result in an oversupply when end-demand is tapering off.

• Capex intensity (as % of revenues) and R&D costs are elevated even in downcycles for SK Hynix, as it needs to maintain technological leadership and fast evolving product requirements from customers.

• SK Hynix has large production and revenue exposure to China; rising US-China tension and restrictive US chip exports to China could destabilize the long-term prospect of its China production and weigh on its $ bonds. Though, in Oct-23 SK Hynix was designated as a “Validated End User” by the US government, which gave it an indefinite waiver for importing US chip gears to their Chinese plants.

• SK Hynix may be vulnerable to US tariff risk; the company derived 71% of 3Q25 revenues from the US.