Good morning, thank you all for joining us today. We will now begin SK hynix 2023 First Quarter Earnings Conference call. This conference call will be comprised of a presentation by SK hynix, followed by a Q&A session. To ask a question, please press star one on your phone. The company presentation will be simultaneously translated, and the Q&A session will be consecutively translated. With that, we are now ready to begin. Good morning, good afternoon and evening to those calling in from abroad. This is Park Seong Hwan, the Head of IR at SK hynix. Welcome to the SK hynix 2023 First Quarter Earnings Release Conference Call. Before starting the conference call, allow me to introduce the executives present here with me today. First, Kim Woohyun, CFO, Park Myoungsoo, Head of DRAM Marketing, and Park Chandong, Head of NAND Marketing. Let me issue a disclaimer that all outlooks presented by our company are subject to change depending on the macroeconomic and market circumstances. With that, we will now begin SK hynix earnings release conference call. Mr. Kim will first present the earnings for first quarter 2023, followed by the company's plan and market outlook. There will be a Q&A session with the executives. Good morning. Allow me to first report to you the company's performance of first quarter 2023. First quarter saw continuing weakness in semiconductor demand due to financial market instability and concerns of global economic downturn. With seasonality amidst ongoing customers inventory adjustments, DRAM and NAND shipments fell significantly compared to the previous quarter, and prices continued to decline across all applications. Accordingly, our first quarter revenue recorded KRW 5.09 trillion, down 34% from the previous quarter and down 58% year-on-year. For DRAM, bit shipments fell by around 20% quarter-on-quarter, while ASP drop has been moderated to fall by a high teen%. NAND shipment growth fell by mid-teen% quarter-on-quarter, ASP dropped by around 10%. The rate of ASP decline was more moderate compared to the market as a result of conservative sales in response to the rapidly deteriorating NAND market conditions. First quarter costs of sold decreased due to lower bit sales, SG&A also fell from cost reduction efforts. A rapid decline in revenue as well as increased inventory valuation loss from higher inventory volumes and further ASP decline led to first quarter operating loss to record KRW 3.40 trillion, an operating margin of -67%. Depreciation and amortization in the first quarter was KRW 3.56 trillion, slightly lower than that of the previous quarter as a result of reduced capital spending. EBITDA was KRW 0.15 trillion, and EBITDA margin was 3%. Total non-operating loss net of gain was KRW 0.12 trillion. This includes net interest expense of KRW 0.25 trillion, as well as foreign currency related net gain of KRW 0.1 trillion. Net loss before tax was KRW 3.53 trillion, net loss for the quarter was KRW 2.59 trillion, with a net profit margin of negative 51%. Consolidated cash balance at the end of Q1 was KRW 6.14 trillion, down by KRW 0.27 trillion from the end of last year. Total interest-bearing debt was KRW 28.76 trillion, which is an increase by KRW 5.76 trillion from a quarter ago. The company's debt-to-equity and net debt-to-equity ratio at the end of the quarter was 47% and 37% respectively, up from 36% and 26% at the end of last year. I will now move on to the company's market outlook and future plans. Amidst lingering global economic uncertainties, memory demand is expected to decrease from expectations earlier in the year. Customers' memory inventory levels generally declined throughout first quarter. Inventory across the memory industry are expected to improve from the second quarter, with suppliers' production cuts taking into full effect. IT device shipments this year are expected to remain weak. Memory demand growth this year will be driven by content growth. With memory price that has fallen by more than 60% since peak level, increase in memory contents on back of price elasticity is expected to drive demand. Demand recovery driven by content growth and the effects from supply reduction will bring a more balanced situation for demand and supply as we move forward into the remaining half of the year. Next year's industry production growth is expected to be limited due to reduced production capabilities following CapEx cuts this year. Consequently, the strength of recovery in the coming upturn cycle will be significant considering the severity of the current downturn. Looking at demand by application, PC shipment is expected to decline for two consecutive years. Weakness in consumer demand is aggravated by reduced purchasing power due to inflation, as well as higher service consumption since reopening. However, memory contents are increasing with higher sales of high-spec laptops and gaming PCs. While it is also difficult to expect growth in smartphone unit sales this year, inventories are being reduced at some distribution channels, and memory inventories at Chinese mobile customers are also in declining trend. In the second half, demand is expected to recover with the economic rebound in China, together with the launch of new products. Smartphone demand remains polarized between flagship and low-to-mid-end models. Memory contents growth is witnessed in flagship models, which have lower price sensitivity. In addition, certain Chinese customers have been showing interest in high density products of 16 GB or higher LPDDR5X, and high-performance products such as 9.6 Gbps turbo in order to expand sales through product differentiation. These differentiation efforts are expected to drive mobile memory demand this year. Demand in the server market is expected to soften this year due to tightened corporate IT spending and inventory adjustments by CSP customers. Server customers' memory inventory is also in declining trend. Since the majority of the inventory is DDR4 products, this year's demand is expected to rapidly shift towards DDR5. In addition, demand for 128 GB or higher density DDR5 modules is quickly rising as competition intensifies for technology development and commercialization of large language models and generative AI such as ChatGPT. As a result, would stimulate server memory demand this year. All in all, memory demand for this year is projected to grow by mid to high single digits for DRAM and mid to high teen from NAND, with potential upside demand in the second half, depending on macroeconomic situation. We will flexibly respond to meet customers' demand by actively shifting product mix as required. Our sales bit growth in the second quarter is expected to grow by double digits sequentially for both DRAM and NAND. This has more than offset the level of decline we saw in the first quarter. Not limited to the base effect of low sales volume in the previous quarter, we are also planning to proactively respond to growing market demand of DDR5 and LPDDR5, as well as 176-layer SSD and uMCP products. We expect meaningful revenue growth for the second quarter. Memory market saw an unprecedentedly low level of demand growth last year. Demand growth outlook for this year is again being revised down from earlier forecasts. In particular, the DRAM industry, which had been generating profits despite market fluctuations, inevitably turned to a loss in the first quarter. In response to these dire market conditions, we are executing our CapEx in line with our previous plans to cut back spending by more than 50% on a consolidated basis compared to that of last year. This implies minimized level of investments in every aspect, excluding the essential investments to maintain competitiveness. However, we are maintaining investments for products such as DDR5, LPDDR5, and HBM3, which are expected to drive demand this year. By securing readiness for mass production of 1bnm DRAM and 238-layer NAND within the year, we are planning to be fully prepared for swift customer support when market conditions improve. In efforts to bring down excessive inventory and to bring forward the timing of market balance, we reduced wafer inputs of some legacy and low-margin products during the fourth quarter, and the effects from the lowered wafer loadings have been gradually materializing in the first quarter. Reflecting the current outlook on this year's market demand, which has been lowered from prior expectations, and in order to flexibly operate our production facilities in line with the market demand and profitability, we're now adjusting wafer starts of products that have relatively high inventory levels. All manufacturers are cutting back production, and as the impact from adjustments start to materialize more meaningfully in the second quarter, we expect inventory for the industry to reach a more normalized level within this year. Despite the difficult market conditions today, we'll maintain our competitiveness by focusing on technology and product development, which will be the driving force for future growth. The proportion of our core products of 1anm DRAM and 176-layer NAND out of total production is not likely to be expanded at a normal pace due to the CapEx cut. Yield rates of all products using 1anm DRAM and 176-layer NAND have now reached very stable levels and therefore will drive cost reductions this year. We will maintain industry-leading technological competitiveness by completing ramp-up preparations of next generation 1bnm and 238-layer product by mid-year. Compared to 1anm, 1bnm product's net die efficiency is significantly improved while process efficiency is also maximized with increased level of EUV applications. Having already secured high yield rates in initial testing stage, we'll be able to quickly shift to these products once market conditions improve next year. Growth of DDR5 market, in which we have a competitive advantage, is expected to accelerate this year. Our DDR5 products, which were introduced early in the industry, have the most number of products that are validated by CPU companies. As the only supplier in the industry that provides 1anm-based high density modules such as 128 GB or more, we are well-positioned to effectively support customers' demand that require intensive memory workloads, such as AI. We have also completed the development of 24 GB HBM3, which is the largest density currently available, and the product is now being shipped for customer samples. By stacking 12 layers of chips using TSV technology for the first time in the industry, we have maintained the product height same as the 16 GB product, which adds to our product competitiveness. Leveraging such product competitiveness, we are anticipating our sales of 128 GB at higher density DDR5 DRAM modules this year to increase by more than 6x. While sales of HBM products to increase by more than 50% this year compared to that of last year. We expect the growth of sales for these products to continue in the following year. Having the competitive edge, such as 1anm-based DRAM full product lineups and far outpacing market position in HBM, we will absorb growing AI demand in the future and continue to solidify our leadership position in the industry. Last but not least will be the company's ESG management activities. Last July, the company disclosed midterm ESG targets for 2030 based on the ESG framework called PRISM, and is implementing ESG management in steps by annually reviewing yearly goals and their progress. At the ESG management committee held in early April, the performance of the past year was reviewed, and as a result, have found 21 out of 27 annual goals were achieved. This includes several goals of high interest, such as 100% rate of renewable energy consumption in global sites. For areas that have insufficient results, the ESG management committee, led by the company's key executives, will continuously evaluate and make efforts for improvements. Despite the rapidly deteriorating memory market and continuing uncertainties throughout all areas of our business, we will strive to efficiently achieve our mid to long term targets for 2030 by progressively promoting ESG management based on PRISM framework. Thank you. With that, we are now ready to take your questions. Now Q&A session will begin. Please press star one, that is star and one if you have any questions. Questions will be taken according to the order you have pressed star and number one. For cancellation, please press star two, that is star and two on your phone. The first question will be presented by Ricky Seo from HSBC. Please go ahead with your question. Thank you for taking my two questions. First, you mentioned that actually you provided a softer demand outlook compared to the early year forecast. I want to know what exactly you're seeing across applications that has changed that drives this softer outlook. Secondly, what inventory levels are you seeing within SK hynix? What are your DRAM and NAND inventory levels as well as the breakdown across customers as you see it? Specifically, if you can provide a quarter-on-quarter comparison, that would be very helpful. Thank you. Let me first address your first question on the slowdown in demand. Indeed, this year we expected that there would be stronger growth compared to the prior year, as falling ASPs would likely drive memory content growth as well as we're seeing some progress in the inventory digestion at customers. Also there was the expectation for China's reopening to translate into an economic recovery. Now what we're seeing is continued macroeconomic uncertainties as well as a further slowing of consumer sentiment that now drives our newer outlook for mid to high single-digit growth in DRAM and mid to high double-digits, excuse me, mid to high teen growth for NAND. Again, we're seeing slower shipment growth across applications in our newer outlook compared to early year, and we now expect a decline across all applications year-over-year for server, PC, and smartphones. That said, we continue to believe that content growth driven upside as well as the move towards high densities, higher capacities driving demand remains intact with our original outlook. Judging from the movement of the past few years, we believe that this first quarter would represent the bottom for set shipments for our end applications. As we move into the second half of the year, we expect some improvement over the first half. Across applications for the smartphone segment, we believe that the key point in the second half, the key driver would again be the movement towards higher capacity models that we are seeing and hearing from our customers. For the PC segment, although the situation overall is quite dim, we expect there to be some replacement demand even after the special upside that we had seen throughout the pandemic with the upside driven by Chromebook demand and also the various value experiences that were required during that remote environment. On top of that, as was briefly mentioned in the remarks, generative AI models are driving fast growth in demand for the higher density and high bandwidth products. We believe this would be an upside factor into this year as well as the next. Thank you for your question. I will take your question on Hynix's inventory level as well as the expected peak as we see it. In the first quarter, despite production cuts due to the significant decline in revenue, we saw finished goods inventory grow for both DRAM and NAND. That said, as we mentioned in the prepared remarks, we are currently adjusting production primarily for the highly stocked products and also expect the sales in second quarter to more than offset, in terms of growth, the decline we saw in the first quarter. All in all, we expect this to lead our inventory levels to peak in the first half and gradually decline thereafter. About customer inventory levels as we see it, overall, we are seeing a decline across customers, but still some elevated levels at particular customers in particular applications. We believe that the elevated inventory levels that remain at some customers, as mentioned, is intentional on the customer's part to carry some safety or buffer stock in anticipation of limited supply next year. The naturally economy-sensitive consumer electronics makers are likely to continue remaining conservative in their procurement patterns and carry lean levels of inventory until they see actual positive signals towards demand recovering. That means we could even expect some upside when the end markets do actually improve because these consumer electronics makers first could convert or transition towards more active procurement. The next question will be presented by Nicolas Gaudois from UBS. Please go ahead with your question. Thank you. Good morning. Just following up a little bit on the latter question. You're guiding for Q2 bits to be up sequentially double digits for both DRAM and NAND. Would you characterize this as being driven by end demand actually starting to recover in some segments and/or customers actually starting to restock? If so, where? Second question, post Samsung announcement on production cuts earlier this month, are you revising further the degree to which you are lowering production on your side? Are you making incremental wafer start adjustments? If so, could you give us more color on the magnitude duration of these cuts and for which products within DRAM and NAND? Thank you. 안녕하십니까? 질문 기회 주셔서 감사합니다. 이전에 하셨던 말씀에 대한 후속 질문을 드리고 싶은데요. 첫 번째로서는 이제 말씀하신 바로는 DRAM과 NAND 공히 2Q에는 two-digit의 bit 출하량 증가가 있을 것이다 하셨는데 이것의 요인이 이제 응용별로 실제 전방 수요가 반등하고 있다는 신호로 보시는 건지, 아니면 고객단에서 재고 축적 수요가 다시 발생했기 때문인지요? 두 번째 질문으로서는 early this month에 경쟁사 Samsung에서 감산 발표를 하였습니다만 이에 따라서 이제 SK hynix에서도 추가적으로 wafer starts를 조절하고 계시다고 말씀을 해주셨는데 그렇다면 그 대상 제품과 규모, 기간 말씀해 주시면 감사하겠습니다. 네, 먼저 그, 2Q 출하량 증가의, 배경에 대해서 말씀드리겠습니다. I will take your first question on the bit shipment growth outlook for Q2. Q1, well, as you know, seasonal off-season, and then front-end demand weakness due to customer inventory depletion continued, and as a result, DRAM, NAND both significant bit growth negative growth recorded. In the first quarter, as you know, both DRAM and NAND bit shipments declined substantially due to weak seasonality as well as weakness across end markets while our customers continued to digest inventory. Q2의 bit growth는 그 상당 부분 고객들의 보유 재고 수준이 peak out 되는 거를 바탕으로 해서 하반기를 대비한 이 결국은 build 수요 개선 대비라고 이렇게 보여지고요. 제품별로는 조금 상이합니다. We believe that the upside we are seeing for Q2 is mostly driven by inventory build-up demand from the customers ahead of the second half because we're currently seeing significantly broad-based our customer inventory levels close to peak. The situation of course depends on the actual application. 그 고용량 중심의 DDR5 제품 수요는, 실 수요 베이스로 해서 크게 지금 늘고 있고요. 더불어서 고용량 모바일 제품, 그다음에 그래픽, 제품 이러한 부분들이, 실 수요 베이스로 해서 지금 증가하고 있습니다. 다만 뭐 다 아시겠지만, computing DDR4 제품은 재고 부분 때문에, 2Q 그 수요는 여전히 약세일 걸로 그렇게 보고 있습니다. We are currently seeing real demand. We're receiving real demand from our customers for the high density DDR5 offerings as well as high density mobile and graphics products. As you would know, for computing application-based DDR4, this product is very highly stocked at the moment. We're seeing real demand trending very weak in Q2 for DDR4. 좀 덧붙이자면 Q1 growth 감소분은 사실은 좀 재고 조정에 따른 그 좀 과도한 그 bit growth 하락이라고 보고요. 상대적으로 Q2에 bit growth가 늘어나는 부분은 그런 면에서 보면 좀 정상적인 과정이 아닐까 이렇게 생각하고 있습니다. The bit growth decline in Q1 was a result of ongoing inventory correction, and we believe the magnitude was larger than what would have been driven by just demand. We believe that the growth in Q2 would also actually represent a normalization of this trend compared to the prior quarter. 질문 주신 그 수요에 맞는 어떤 저희 생산 조절에 대해서 답변드리도록 하겠습니다. Now, on your question about our production adjustment in line with the demand environment. 현재 메모리 업계가 겪고 있는, 수급 불일치와 또 이로 인한 어떤 재고 수준은 그 정도와 규모 면에서 과거의 어느 때보다 좀 심각한 상황이라고 판단이 됩니다. The memory industry currently faces a supply demand mismatch as well as inventory levels that are unprecedented in scale and their magnitude in recent history. 그런 시장 상황 때문에, 장기적으로 안정적인 이익을 만들어낼 거라고, 믿고 있었던 DRAM도 현재, 업계 전반으로 Q1 적자를 면치 못하고 되었고, 일단 NAND의 적자 폭은 더욱 심화되고 있는 상황입니다. Due to these grave market circumstances, we are seeing DRAM, a long time profit generator, also turn losses in Q1 across the industry, across DRAM players and the losses widening in the case of NAND flash business. 또한 그 현재 그 수요 상황을 고려해 봤을 때에도 그 2분기에도 가격이 급격하게 상승하는 어떤 상승을 기대하기는 어렵다고 판단을 하고 있습니다. Given the demand landscape, we believe that it would not be any more likely that we can expect a dramatic increase in ASPs in Q2 either. 현재 상황을 반영해서 저희 회사는 탄력적으로 In light of these circumstances, SK hynix is taking a flexible and responsive approach to our production operations and are adjusting our wafer starts mainly for the products that are currently heavily stocked. As the effect of production cuts of the industry begin to materialize in Q2, and on top of that, as the more recent production adjustments aligned to the demand landscape come into play, we expect the supply demand situation along with the market trends to improve beginning Q3. The company plans to maintain its conservative production plans until we see a more balanced supply demand situation as well as more adequate inventory levels. The next question will be presented by Giuni Lee from Goldman Sachs. Please go ahead with your question. I have two questions, one on AI servers, second on cash flow. First, I want to know the company's outlook on the AI server related memory market. How are you preparing product portfolio-wise, and what are your broader plans? Secondly, I understand that you successfully financed yourself in Q1 by issuing one and dollar-denominated bonds. I want to know more about the exact cash flow that you reported in Q1. I'll take your question on the memory outlook in relation to AI servers. While the AI server, the broader AI market outlook, could range very widely depending on the exact workload that the AI server or system targets, SK hynix is currently focusing on the best case scenario for the AI market growth. On top of that, we believe that the market is very receptive to such positive upward change or growth because the value experience that you've gained from AI is already very prevalent. We believe that growth will be stronger incrementally going forward. To give you the numbers, we believe that, at a maximum server shipments and related memory shipment growth could amount to nearly 40% over the next five years, whereas in revenue terms for DRAM and NAND combined, that could represent, AI could represent a 30% growth opportunity for the next five years. For the immediate term, we are seeing a positive impact to our business from the DDR5 28 GB or higher density modules as well as HBM offerings, as was mentioned in the prepared remarks. Revenue-wise, we expect again that DDR5-based high capacity modules would grow in revenue more than sixfold over 2022, and HBM would see a more than 50% growth year-over-year. We understand that most of these orders are actual orders that have been received. Furthermore, we expect even stronger growth next year for both the DDR5 and HBM offerings. 제품 경쟁력 측면에서 자사는 현재, 128 GB 3DS 서버 DIMM 외에도, 중장기적으로, 32 GB 기반의, 128 GB 및 256 GB까지, 차질 없이 지금 준비를 하고 있고요. HBM 같은 경우는 현재, HBM3, 5.6 Gbps 대 제품에 더해서, 올 하반기에, 8 Gbps 대 HBM3E까지, 샘플 공급하고 양산 이제 들어가는 준비를, 차질 없이 진행하고 있습니다. For our product competitive edge, we currently have in our lineup a 128 GB server DIMM that is built on DDR5. Later on, we are planning higher module capacities, going up to 256 GBs for the immediate term based on 32 Gb mono die density DDR5. For the HBM offerings, we are later planning an 8 Gb per second rated HBM3E to follow up with our current premium offering. 예, 이어서, Q1 현금 흐름에 대해서 말씀드리겠습니다. On first quarter cash flow. 실적 발표에서 보셨다시피 1분기는 매출 감소와 영업 적자 규모 확대에 따라서 EBITDA가 일단 크게 감소했고, 일부 재고도 증가함으로 따라서 운전자본이 증가했으며, 작년 실적에 따라서 구성원의 지급한 구성원의 PS가 연초에 지급되면서, 영업활동으로 인한 현금흐름이 마이너스 한 KRW 2 trillion 발생하였습니다. On cash flow, our cash flow from operating activities was a negative KRW 2 trillion in the first quarter. As you have heard in our earnings report, in the first quarter, EBITDA declined significantly as you may have recognized from the earnings report, due to a significant decline in our in our top line, as well as an increase in our operating loss. On top of that, we saw working capital increase as inventory grew, and we also had to pay out profit sharing bonuses to our employees based on last year performance. 어, 여기에 추가해서 작년에 입고된 일부 장비에 이월 결제금을 포함한 유형자산 취득 금액이 삼조 원 이상 또 반영이 되어 있습니다. We also had to reflect the more than KRW 3 trillion in PP&E acquisition costs, including payables carried over for equipment that were installed last year. 아, 이후에, 그, 이후 분기는 투자 축소에 따라서, 어, 현금 유출은 상당히 좀 제한될 것으로 판단을 하고 있고, 아, 매출이 성장하고, 어, 재고를, 어, 재고가 축소되면 일단 현금의 유입이 예상이 되는 바, 아, 이 분기 이후론 안정적인 지출 관리와 현금 관리, 어, 현금 보유 수준에 대한 관리가 될 것으로 예상하고 있습니다. In the following quarters, we expect the cash outflow to be limited as we are moving in line with our announced investment cuts. Further on, as revenue grows and on, our, excuse me, inventory is worked down, we expect there to be more cash inflows. Net from net, we would say that after Q2, we would see a more stable management of our overall expenses as well as cash flow. 네, 다음 질문해 주십시오. 다음으로 질문해 주실 분은 JP Morgan의 박성준 님입니다. 예, 저는 두 가지 질문이 있는데요. 어, 최근에 아시겠지만 경쟁사 감산 발표를 했는데요. 이걸로 인해서 그 실제 고객들의 어떤 센티멘탈의 변화가 있는지, 최근에 현물 가격 같은 걸 보면 좀 떨어짐 폭도 많이 줄어든 것 같고, 이렇게 약간 flattish하게 움직이는데 실제 고객들의 어떤 센티멘탈에 변화가 있는지 궁금하고요. 어, 두 번째는 차입금 관련된 질문인데 지금, 어, 이자율도 많이 올라서 올해, 혹시 올해 그 이자 비용이 어느 정도 되는지 궁금하고요. 그다음에 올해랑 내년, 그, maturing debt, 그, 도입, 그, 차입금 돌아오는 규모가 어떻게 되는지 말씀해 주시면 감사드리겠습니다. Thank you. My first question is, following your competitor's production cut announcement, I want to ask the company if you see this as reflecting an actual change in customer sentiment because, for example, in the spot market you are seeing spot prices plateauing or leveling out after significant declines to date following the announcement. Secondly, that this question is about your current year interest expense as well as your portion of debt or amount of debt set to mature in year 2023 as well as 2024. 먼저 첫 번째 질문 답변드리겠습니다. I'll take your first question. 고객들의 sentiment 변화 뭐 아주 뭐 확연하다라고 말씀드리기는 좀 어려울 텐데요. 그럼에도 불구하고 몇 가지 변화는 있습니다. You've asked whether this production cut announcement induced a spot market movement and other phenomena are due to a change in consumer sentiment. Whether that is the case, whether we are seeing actual customer sentiment change, we cannot say for sure that is the cause, but we do have some explanation to offer. 특히 그 하반기 준비를 위해서 어, 이 분기에 그 일부 어, 수요를 이제 좀 다시 적극적으로 대응할 수 있는 어, 구매를 해야 되는지 문의하는 고객들도 지금 생기기 시작했고요. 어, 두 번째로는 현물가가 이제는 바닥이고, 어, 그거를 바탕으로 해서 어, 시장 가격 전반적으로 계약까지 좀 안정화 기조로 갈 거냐, 이런 거에 대해서 문의를 어, 많이 받고 있습니다. We can cite the actual questions we're getting from customers. One, some customers are asking if they should now begin preparing for demand returning in the second half by building up their inventory, i.e. resuming procurement starting Q2. Secondly, they're asking whether the spot price have bottomed and whether that will begin translating into a contract price upside and stabilization. 그 제품별로 보면은 고성능 LPDDR5 고용량 제품, 그다음에 서버 DDR5 제품, 그다음에 그래픽 제품 뭐 이런 부분들에 대해서 고객들이 이제 공급 안정성에 대한 문의를 이제 크게 늘리면서 관련 논의를 시작하고 있는 상황입니다. Specifically, our customers are most interested and keen to know whether they will get stable supply of particular products, such as the high performance and high density LPDDR5 for mobile, as well as server DDR5 and our graphics products. Related discussions have actually begun around this rising interest. 차입금과 차입금에 따른 이자와 향후 차입금 만기에 대해서 말씀드리겠습니다. About your question on our interest expense expectation for this year following our new borrowings as well as the expectation for debt maturing. 모두 다 시장 금융 상황과 금융시장에 대한 그 상황에 대해서 모두 인지하고 계시다시피 일단 2023년에도 고금리 기조가 유지될 전망으로 판단을 하고 있습니다. You would know well about the financial market conditions that continue to persist. Likewise, we also expect high interest rates across the world to persist in 2023. 2023년에 신규 차입에 대한 실행을 고려해 봤을 때 2023년도 이자 비용은 작년보다 약 2배 정도 증가한 KRW 1 trillion 정도로 예상을 하고 있습니다. Following the new round of debt financing, we expect interest expense for year 2023 to double roughly over year 2022 to KRW 1 trillion. 그 향후 3년간 연평균에서의 만기 도래 차입 규모는 KRW 4 trillion-KRW 5 trillion 이내로 차입금 만기가 지금 잡혀 있습니다. Over the next three years, we expect an annual average KRW 4 trillion-KRW 5 trillion in debt to reach maturity. 앞서 말씀드린 바와 같이 다가올 upturn에 있어서도 현재 추진하고 있는 투자와 비용의 어떤 효율적 관리를 유지함으로에 따라서 장기적으로 차입금 규모는 규모를 줄여 나가도록, 나갈 예정입니다. As mentioned in the remarks, our plan is to maintain current investment and cost efficiencies in the following upturn to long term, gradually work down the size of our borrowings. 네, 다음 질문해 주십시오. The next question will be presented by Sung Kyu Kim from Daiwa Securities Korea. Please go ahead with your question. 예, 안녕하세요. 그 질문 기회 주셔서 감사합니다. 전 두 가지 질문드리겠습니다. 그 첫 번째 질문은 최근 그 미국 정부의 그 반도체법 CHIPS Act 관련해서 이 guardrail이 발표되면서 그 향후 중국에서 그 어떤 첨단 공정의 신규 Capa 증설은 어려울 것 같은데요. 그 반면 이제 공정 전환은 어느 정도 가능할 것으로 좀 보여지는데요. 그 향후 이 중국 공장 운영 계획 관련해서 좀 의견 부탁드리겠습니다. 두 번째 질문은 재고자산 평가손 관련 내용입니다. Q1에 재고자산 평가손이 어느 정도 규모로 발생했는지, 그리고 Q2 전망에 대해서도 가능한 말씀 부탁드리겠습니다. 감사합니다. Thank you for taking two questions from me. First, following the U.S. government's announcement of the Guardrail provision to the CHIPS and Science Act. Now it is the case that in China you cannot add or expand new capacity for your advanced processes, but it seems that you can continue on with process migrations. What specifically are the company's China fab plans in light of these developments? Secondly, about your inventory write down charges or inventory valuation loss, what exact number did you see in Q1 and what's your outlook for Q2? Thank you. First, on the process migrations in China and our plans. Currently, we are considering various factors, including the long-term geopolitical risk, market demand, and fab operation efficiencies in determining our direction for China fabs going forward, and we are looking at various different scenarios considering these. However, nothing is set in stone yet or has significantly changed in our as is operation plans for our China facilities. Our current focus, of course, is on maintaining the stability of our China fab operations, and we are also positive towards our likelihood of receiving an extension for the U.S. government's waiver on equipment export controls into China. On the inventory valuation loss. In the first quarter, the company recognized close to KRW 1 trillion in inventory valuation loss as inventory grew while ASP declined quarter-on-quarter. If there are any inventory write down charges that do occur in the second quarter, we believe they would be significantly smaller, if any, because we expect inventory to peak in Q2 as well as for the ASP declines to moderate significantly. In the second half, we expect inventories to gradually decline and ASPs to stabilize, in which case we could even expect a reversal in the losses that we saw prior as we sell undervalued inventory and this would be contributing to our P&L recovery. The next question will be presented by Hyunwoo Doh from NH Securities. Please go ahead with your question. Thank you. My first question is on your DDR5. Your DDR5 seems to be more competitive in terms of product quality compared to your peers. How is this so from the company's viewpoint? Also, what's the current profit margin difference of DDR5 over DDR4? Secondly, I have also heard about the company's leadership very much in HBM. Could you provide more color on your business outlook for the HBM segment? Also, likewise in DDR5, how are you more competitive than your peers in HBM? 네, 질문 감사드립니다. 먼저 DDR5의 사업 경쟁력에 대해서 먼저 말씀드리겠습니다. Thank you. First, on DDR5 competitive edge. 자사는 2018년 세계 최초로 16 Gb DDR5를 개발한 이후에 2021년도에 또 세계 최초로 24 Gb DDR5 샘플 또 시장에 deliver 했고요. 작년에는 최초로 6,400 Mbps 모듈 샘플을 출하하는 등 그 제품 개발 및 시장 introduction 선도를 하고 있습니다. Back in 2018, we were the world's first to develop, successfully develop a 16 Gb DDR5. After that followed up with a 24 Gb DDR5 that sampled with customers in 2021. Just last year, we delivered samples of a 6,400 Mb per second rated DDR5 modules, again, as the world first. I would say that we have leadership in the development and the delivery to market of the DDR5 segment. 그러다 보니까 업계에서 가장 먼저 그 관련 모듈 부품들의 수급 및 품질 안정성 확보 작업을 먼저 할 수 있고요. 그다음에 모듈의 신뢰성 장기 신뢰성 관련된 검증 작업도 파트너 및 고객사들과 선행해서 진행할 수 있었습니다. 결국은 이러한 것들이 저희의 현재 경쟁력으로 나타나고 있는 걸로 이렇게 봅니다. That allowed us to gain priority in securing the necessary module components, and also to ensure product quality of the components that we sourced that were necessary for these DDR5 modules. On top of that, we were able to work very closely in advance with our partners and customers in verifying the reliability of these modules along the development process from very early on. We believe this drove our competitive advantage indeed in DDR5. 제품 공급력 측면에서도 서버 같은 경우에는 DDR4 대비 DDR5의 crossover가 내년 2Q 정도로 저희는 예상을 하고 있고요. PC는 내년 1Q 정도 그렇게 보고 있습니다. 그렇지만 이제 서버 기준으로 말씀드리면 자사 사업의 crossover는 올 하반기에 선도적이고 적극적으로 진행을 해서 전체적으로 시장 내에서 저희가 그러한 부분들을 lead 할 수 있는 준비가 돼 있다고 이렇게 생각을 합니다. On product supply side, a DDR5 crossover compared to DDR4 is expected for the server segment in Q2 2024, whereas we expect the timing of bit crossover for DDR5 to be Q1 2024 for the PC segment. Internally, we are minding and working towards an even earlier timeline to transition to DDR5 in our DRAM lineup within the second half. We believe that we are quite prepared and are working with great focus to pursue our DDR5 leadership further. DDR5 관련 마지막으로 그 D4, DDR4 대비해서 수익성 질문을 주셨는데요. 둘 제품 사이의 비용 구조는 완전히 다릅니다. 워낙에 DDR5가 많은 BOM cost가 올라붙기 때문에 비교하는 거는 사실 좀 어려운데, 그런 면에서 자산은 DDR5와 DDR4 간의 수익성 gap이 생기지 않도록 시장 가격을 운영을 하고 있습니다. On the margin difference of DDR5 over DDR4. Well, it would be difficult to compare apples to apples because the, excuse me, cost structure is very different between DDR5 and D4 because DDR5 has many BOM cost, bill of materials cost adders. Minding that, though, we are operating our market price to minimize that gap, that prevents DDR5 purchasing due to that cost difference. 다음으로 HBM, 사업 전망과 경쟁력에 대해서 설명을 드리겠습니다. On the HBM business outlook and our competitive edge. 몇 가지로 이제 요약해서 말씀을 드리면, 그 자사의 HBM 경쟁력은 설계의 우수한 설계 역량 기반의 성능 면이 하나 있고요. 두 번째로는 그 업계 최고 수준의 품질, 세 번째로는 선제적인 투자 관리를 통한 그 time to market capa 준비하는 부분, 마지막으로는 글로벌 그 관련 SOC 리더들, 그리고 미래 잠재 고객인 클라우드 업체들과의 굉장히 긴밀한 협업이라고 이렇게 말씀드릴 수 있겠습니다. I could summarize our HBM advantage in four different points. One would be our stellar performance of HBM products driven by robust designs. Secondly, industry leading quality. Thirdly, our proactive investment into HBM over the years that ensured fast time to market and sufficient capacity. Lastly, our strong collaboration with SoC or system on chip, chipset makers across the world, as well as cloud service providers who are our future customers in the HBM field. 조금 더 부연해서 말씀드리면 성능 측면에서 자사는 현재 HBM3 6 gbps 제품에 이어서 More specifically on the performance side, we currently market in an HBM3 that is rated at 5.6 Gb per second in data rate. We plan to sample an 8 Gb per second HBM3E in the second half this year, targeting volume production ramp in the first half 2024. On the quality side, the most crucial issue would be to prevent excessive heat that can be generated in the process of stacking these individual HBM layers and connecting them using through-silicon via interconnects. From HBM2E onwards, we have used very unique and proprietary technology in order to ensure the industry's best heat dissipation quality for our HBM products. On the capacity side, we are preparing HBM production capacity that is enough to support more than 50% annual growth going forward. We are translating this into actual business opportunity with our customers. The last question will be presented by Sunwoo Kim from Meritz. Please go ahead with your question. Yeah. Meritz. Thank you. I have two questions. First, on your NAND flash business, we are now seeing your NAND profit margins having declined significantly to a very worrying level. While in the past, your strategy and the industry strategy was to scale up simply, now we believe it is the time to focus on profitability improvement. What kind of strategic plan would the company have for your NAND flash profit margin? In Q4, in relation to this, I believe there was an additional cost coming from the Dalian FAB amounting to 200 billion KRW that caused a revision to your reported performance. I wonder if this was somehow reflected in your operating loss or was this also a non-recurring cost? Secondly, as you mentioned, HBM, I do agree that you are doing very great preparations across performance, quality, time to market and capacity. I have a suggestion and question because HBM also has very high BOM costs, and if it were to follow the business model of commodity memory, then it would be very dependent on the cycles. I wonder if the company has any plans to turn this into a made to order model, perhaps, in order to secure more visibility in terms of price and quantity? Thank you. I'll take your question on NAND. Our NAND business for many years before remained at roughly a 10% share of our business, so a relatively small share. We also saw a significant technology and product portfolio gap with competitors during those years. To make up for this gap and rise in our NAND business, we took three measures. First, to scale up the business, and now we have reached economy of scale. Secondly, we have reached a higher mix of production, a higher mix of bits for our 176-layer stack for the NAND Flash, which is higher than the competition, and this allowed us to catch up in terms of the technology roadmap and also the cost competitiveness. Thirdly, we pursued an M&A with another NAND Flash player in the market in anticipation of potential restructuring of the industry over the long term. As a result of such efforts, we were able to raise our combined NAND Flash market share to the 20% level and also product portfolio-wise, we diversified from a mobile focus to one that includes a broader range of SSDs. That said, year 2022 being the first year since the Solidigm acquisition, there were various stand-up costs as well as charges from acquisition and counting, including the purchase price allocation that added to the non-recurring costs that impacted performance. While we have secured a product level advantage by securing and achieving a higher mix of 176-layer bits, we expect our business, NAND business to face a challenging outlook for the immediate future, given the continued market weakness as well as continued costs from the M&A PMI procedure. We are currently laser focused on reducing redundant and inefficient costs, cost driving matters, such as by implementing company-wide CapEx and OpEx controls and also continuing to integrate our two companies' individual functions and overall streamlining our cost structure. When business returns, we will be completely ready to convert to a mix of premium high value added products such as high spec and advanced enterprise SSDs, so as to ensure a quick rebound. About your second question. I believe that the costs, the added costs coming from the Dalian fab was a result of the difference in the timing of the performance report and then the timing when the costs were closed and reported. Due to the time lag of the company's report and also the separate and consolidated financial reporting, the Dalian fab and related costs also have not been reflected into our full performance just yet due to that time lag in reporting. 세 번째 질문에 답변을 드리겠습니다. On your third question. 먼저 그 저희 회사의 어떤 HBM3나 DDR5 등의 어떤 기술적 우위에 대해서 관심을 가져주셔서 감사드립니다. I would like to note my gratitude for your interest and notice of our technology advantage in HBM3 and DDR5. HBM은 ChatGPT 등 AI 서비스 확대에 따라서 아마 고속 성장하는 시장으로 AI 연산 용도의 하이엔드 그래픽 제품을 제공하는 어떤 고객 수가 제한적이고, 현재 가장 앞선 제품인 HBM3를 공급할 수 있는 업체도 현재 거의 없는 상황입니다. For the HBM market, which is benefiting from the proliferation of AI services like ChatGPT, we have a handful of customers that can actually build the AI compute-oriented high-end graphic systems and even fewer suppliers that can provide them with the latest and fastest HBM3. 어, 한정적 고객 그리고 공급 업체라는 어떤 시장 특성을 활용해서, 어, 해당 제품에 한해서 고객의 성장 또는 당사의 제품을 통해 효용을 창출할 수 있는 어떤 가격 또는 사업 체계로 비즈니스 모델을 전환을 고려해 볼 수는 있을 것 같습니다. Given this limited customer and supplier base, we could consider using this as an opportunity to transition to a pricing and business model that can deliver greater value, through customer growth and more, stable and supply visibility. Excuse me. 점진적으로 어떤 이런 비즈니스 모델의 어떤 변화가 일어난다면 점진적으로 어떤 이익의 변동성이 완화되고, 성장의 가시성도 확보될 수 있을 것으로, 기대하고 있습니다. If we are able to implement such business model, we expect there to be benefits, including a smoothing out of the profitability ups and downs, as well as greater visibility into our business growth. 네, 이상으로 SK hynix 2023년 1분기 경영실적 컨퍼런스 콜을 모두 마치겠습니다. 감사합니다.