Good morning, afternoon, and evening. Thank you for joining the SK hynix 2024 Q2 Earnings Conference Call. For today's call, we'll have SK hynix presentation, followed by a Q&A session. If you have a question, please press star key and number one on your phone keypad. Please note that the presentation will be translated simultaneously, and the Q&A session will be translated consecutively. With that, we're now ready to begin. Morning, afternoon, evening, this is Seong Hwan Park, Head of IR at SK hynix. Welcome to the SK hynix 2024 Second Quarter Earnings Release Conference Call. Allow me to introduce the executives present here today. We are joined by CFO Woo-hyun Kim, Head of DRAM Marketing Kyu Hyun Kim, and Head of NAND Marketing Seok Kim. Let me issue a disclaimer. All outlooks presented by the company are subject to change depending on the macroeconomic and market circumstances. With that, we'll now begin the SK hynix earnings release conference call for the second quarter 2024. Mr. Kim, CFO, will first present the earnings, followed by the company's future plans and market outlook, and a Q&A session with the attending executives. Good morning, everyone. Allow me to first introduce the company's performance for the second quarter of 2024. In the second quarter, AI memory product demand continued to hold very strong, while demand for conventional memory products also grew as customers tried to build inventory ahead of potential tightness in the future, which led to another quarter of meaningful price increase for both DRAM and NAND. As a result, our second quarter revenue reached KRW 16.4 trillion, an increase of 32% sequentially, and 125% year-on-year, marking the highest quarterly revenue in our company's history. DRAM saw a significant increase in sales of general server products, along with the expansion of HBM3E sales, leading to bit growth of low 20% sequentially, above guidance of mid-teen percent. ASP rose mid-teen% sequentially due to higher mix of premium products, such as HBM and server DRAM, while prices rose across all products for 3 consecutive quarters. Particularly notable was HBM sales, which drove overall revenue growth by growing over 80% from the previous quarter and over 250% year-on-year. For NAND, although sales of enterprise SSD and mobile products increased, total bit shipments decreased by low single digits sequentially due to reduction in sales of discrete products and client SSDs, where demand recovery remains relatively muted. Meanwhile, ASP increased by mid- to high-teens% as prices rose across all products. Due to revenue expansion from rising memory prices, higher mix of value-added products and favorable FX impact, operating profit for the second quarter increased by KRW 2.58 trillion from the previous quarter to KRW 5.47 trillion, with an operating profit margin of 33%, up ten percentage points from the previous quarter. Amidst rapid improvement of conventional DRAM profitability due to rising prices, the significant increase in sales of HBM3 products contributed to the growth in DRAM profit, profits. NAND margins also improved as a result of continuing ASP increases since fourth quarter of last year, expanded sales of enterprise SSDs, and ongoing focus on profit-oriented management. Depreciation and amortization expenses for the second quarter amounted to KRW 3.12 trillion, with sequential decline continuing due to reduced capital spending last year. EBITDA reached 8.59 trillion KRW, with an EBITDA margin of 52%. Non-operating loss net of gain for the second quarter was KRW 0.42 trillion, including net interest expense of KRW 0.28 trillion, and net foreign currency-related loss of KRW 0.16 trillion. As a result, net pre-tax income was KRW 5.05 trillion, and net profit for the quarter was KRW 4.12 trillion, and net profit margin was 25%. Consolidated cash and cash equivalents, including short-term investments at the end of second quarter, was KRW 9.7 trillion, down KRW 0.6 trillion from the end of previous quarter. Meanwhile, interest-bearing debt was 25.2 trillion won, down KRW 4.3 trillion from a quarter ago. As a result, debt to equity and net debt to equity ratio recorded 42% and 26%, respectively, meaningfully improving compared to a quarter ago. Next, I'll discuss market outlook. Continuing from last year, demand for AI memory products is seeing another year of growth. Along with HBM, demand for high-density server DRAM and enterprise SSD are also rising. An increase in content for PC and smartphone is also expected in order to support AI features on the device. Although memory suppliers are increasing production utilization this year, they are prioritizing to support HBM and enterprise SSD, which are showing faster demand growth than conventional memory products. In particular, when memory suppliers allocate more wafer capacity for HBM, production capabilities for other DRAM products can be constrained, as HBM consumes more wafer capacity due to larger die size. As a result, DRAM prices are increasing continuously when demand for traditional end markets has not yet fully recovered. In the second half of this year, strong demand from AI servers are expected to continue, as well as gradual recovery in conventional markets with the launch of AI-enabled PC and mobile devices. Looking at demand by application, the demand recovery in the PC market is trending relatively weaker than initial expectations. High inflation and cost burden due to rising memory prices are impacting not only downstream demand, but also product lineups. Customers are preparing for the launch of high-spec products with AI features to create new demand, while also responding to the divergent demand trends by offering more affordable low-spec products. As a result, high-spec devices are expected to drive memory demand in the second half, and in the longer term, increase in memory content and wider adoption of low-power memory are expected to support optimal operation of AI PCs. Similarly, the smartphone market also showed more moderate demand recovery in the first half, but the release of new AI-enabled flagship and foldable phones are expected to help improve that demand in the back half of the year. Smartphones adopting AI functions require higher contents than existing high-end models. The further releases of these products that are scheduled in the second half to next year are expected to drive demand. In the server market, AI servers are driving demand growth with exponential increase in the workload needs as generative AI evolves to multimodal models, and also with the ever-increasing AI-related spending from big tech companies. Requests from customers for additional HBM supply this year and efforts to expand CoWoS capacity in the supply chain also indicate strong demand for AI servers. In addition, general purpose server demand is also expected to gradually improve, along with the impending replacement cycle for data center servers that were invested six to seven years ago, especially with growing needs to adopt new energy-efficient platforms. Now, I'll discuss our plans. Third quarter DRAM bit shipment is expected to grow by low single-digit% sequentially, driven by further expansion of our HBM sales volume, where strong demand is evident. NAND bit shipment is expected to decrease by mid-single-digit percent sequentially, despite increase in eSSD sales volume, given yet soft end demand in conventional applications and relatively high customers' inventory. NAND revenue growth, however, is expected to continue with rising prices and optimized product mix. HBM3E sales increased significantly in the second quarter as demand gained momentum. In the third quarter, HBM3E bit shipments are expected to be greater than that of HBM3, resulting in HBM3E accounting for more than half of total HBM sales volume this year. HBM3E 12-high product samples have already been shipped to major customers, and is on track to start mass production in this quarter and volume shipment to customers by fourth quarter. With a full product portfolio ranging from HBM2E to HBM3E 12-high products, we plan to maintain our competitive advantage in the HBM market. Our DDR5 products have been successful in securing early market leadership with stable technology and quality since first-generation products. Currently, we are the sole supplier in the industry offering 256 GB products, maintaining our leadership of DDR5 products. In the second half of the year, we are planning to release 32 Gb DDR5-based high-density server DRAM, as well as MCR DIMM, which offers superior bandwidth compared to existing RDIMM, to target high-performance computing market. We're closely collaborating with major server companies to successfully launch products that satisfy customers' requirements. For NAND, we achieved notable results in terms of revenue and profitability in the second quarter. We are planning to focus more on strengthening product mix and availability of product lineups for future improvement. We are currently expanding sales of high-density enterprise SSDs, where demand is increasing, and we are also raising production utilization for some of our NAND fabs to support growing demand. With the demand increase for enterprise SSDs this year, we have increased our enterprise SSD sales by 50% in the second quarter compared to the previous quarter, and we expect our annual eSSD sales to grow by nearly 4 times compared that of last year. We plan to lead the market in the second half of the year with 60TB eSSD, the only available ultra-high-density product in the industry. We also plan to release 128TB enterprise SSDs in the beginning of next year to maintain our continued edge in the ultra-high-density eSSD market. In addition, we plan to support upcoming AI PC demand by offering high performance and low power PCIe Gen 5 client SSD that was developed in June. Construction for M15X, which was recently decided to support the growing demand for AI memory, as well as Yongin Cluster, which will be our next-generation production site, is progressing as planned. Amid increasing infrastructure investment compared to past years, investment needs are also rising to meet demand of conventional DRAM, as well as HBM, which requires more wafer capacity than regular DRAM. Therefore, this year's CapEx level is expected to be higher than what we expected in the beginning of the year. Nonetheless, our investment plans will be prudently decided based on end demand and profitability, and will be executed within the generated operating cash flow. We will continue to pursue financial soundness by executing investments efficiently, and this quarter's meaningful reduction in debt levels was in line with these efforts. Next, let me share our ESG management activities and performance. We issued sustainable report 2024, highlighting our ESG management activities and achievements during the year of 2023, as well as future commitments. In 2023, we achieved company-wide renewable electricity adoption rate of 30% level for the second consecutive year. Also, we received international standard certifications from the British Standards Institution for our compliance and anti-bribery management system based on our compliance framework. These certifications recognize our achievements in complying with domestic and international standards and proactive prevention of related risks. This quarter, we announced a joint declaration for greenhouse gas reduction with 28 members of the ECO Alliance, composed of material component equipment suppliers. The greenhouse gas emissions of the participating companies account for approximately 50% of our Scope 3 emissions from purchased raw materials last year. We plan to implement various collaboration programs, such as operating ESG funds and participating in government-supported renewable energy projects. to support our partners in achieving their greenhouse gas reduction targets. 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. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only one question per participant. The first question will be presented by Nicolas Gaudois from UBS. Please go ahead with your question. Yes, good morning, and thanks for taking my question. You commented earlier on seeing or having seen some upside for conventional server DRAM demand. And I think we've seen the same in terms of factor server builds downstream. How did you see this translating into server DRAM demand upside on your side? Could you effectively quantify it versus what you expected earlier? And if we look at non-HBM server DRAM bit demand growth, could you quantify this as well for your expectations for 2024 and your initial view for 2025? Thanks. Thank you very much for that question. While the rounds of investment in AI servers that began last year continues, we're also seeing improvement in demand for general purpose servers from some customers. This is not only because of the impending replacement cycle for cloud data center servers, which were heavily invested in, in 2017 and 2018, but also because of AI data center deployments that are driving demand for general purpose servers. In particular, the rapid growth of AI servers with high power consumption has led to a move to upgrade existing conventional servers to new server platforms, with significantly improved power efficiency to reduce operating costs and free up power across the data center. Server DRAM, excluding HBM, is expected to see mid-20% level demand growth this year and next year as AI technology expands from training to inference, driving robust AI server demand, along with replacement demand for general purpose servers. The next question will be presented by Peter Lee from Citigroup. Please go ahead with your question. I am Peter Lee from Citigroup. Thank you very much for this opportunity to ask my question. I have a question about investment. With the recent announcements of increased investment and capacity utilization by memory companies, concerns have been raised about supply growth beyond 2025. So what is your company's view and direction regarding this matter? [Foreign language] Thank you very much for that question. Based on past experience, you may be concerned that increased investment by suppliers may lead to oversupply, but the current investment and ramp up of production is centered on HBM, which has a much different market structure and production characteristics than conventional DRAM. It's not really reasonable to assume that increased investment will automatically lead to oversupply. [Foreign language] As we know, given the die size penalty of HBM and the level of clean room required, bit growth is limited even as investment increases, and the limited production growth is expected to be exacerbated as HBM generations are upgraded. [Foreign language] Furthermore, HBM is basing its investment decisions on at least a year's worth of customer contract volume. So increased investment in HBM means increased product orders. [Foreign language] Demand for HBM is growing rapidly due to increased competition in the AI industry, resulting in a supply shortage even as suppliers expand their capacities. [Foreign language] Currently, demand is concentrated on AI servers due to the nascent AI market. But as AI technology begins to be applied to various different applications, new types of memory products, such as processor and memory, PIM, and Wide I/O and mobile, are expected to emerge and generate new demand. [Foreign language] We expect the memory industry to evolve from a structure of mass production of a small number of products, to a low volume production of a wide variety of different products, and to become an on-demand industry that provides long-term supply of the products that the customers want. [Foreign language] We will work closely with our customers to increase the visibility of demand and focus our investments on products with strong customer demand, so that we can contribute to the stable growth of the market. [Foreign language] Next question, please. [Foreign language] The next question will be presented by Jay Kwon from J.P. Morgan. Please go ahead with your question. [Foreign language] So I'm Jay Kwon from J.P. Morgan. Thank you very much for this opportunity to ask my question. So I have a question about specific investment directions. You said in your presentation that you will be investing largely within the operating cash flow that is generated. So can you elaborate more on what a SK hynix's investment direction for this year and next year is? [Foreign language] Let me answer your question. Thank you very much for that question. Our investment this year is higher than planned at the beginning of the year, due to higher than expected demand for HBM products and our decision to invest in fabs to secure clean rooms for the mid to long term. [Foreign language] In addition, in 2025, demand for not only HBM, but also, general memory, is expected to increase further, requiring significant investment into infrastructure such as M15X Yongin Cluster to prepare for this. Therefore, we expect the scale of investment to increase compared to the historical average. [Foreign language] Given our position as a leader in the AI market and the expected growth and demand, infrastructure investments are essential to secure future growth. Our long-term investment plans reflects this, but we have the flexibility to execute our annual investment plan according to the market demand at the time. Even excluding this year's increased investment, our operating cash flow is improving rapidly, and we will continue to ensure that our financial strength is supported. [Foreign language] Next question? The next question will be presented by Dong-hee Han from SK Securities. Please go ahead with your question. I'm Dong-hee Han from SK Securities. My question has to do with your strategy on managing the capacity for HBM and general DRAM. So there are many views that DRAM supply will be tight until next year, as demand for HBM continues to be strong and demand for on-device AI starts to appear in earnest from next year. So compared to HBM, whose price is set on an annual basis, the price of general DRAM is adjusted quarterly according to supply and demand, and profitability is improving rapidly. How does the company plan to manage the capacity between HBM and general DRAM to maximize DRAM profitability? Let me answer your question. As you have mentioned, the available capacity for general DRAM production has remained at a reduced level since the production cutbacks, even though suppliers are increasing their utilization rates due to the rapidly growing demand for HBM. While overall capacity is expected to increase next year due to the increased industry investment, a significant portion of it will be utilized to ramp up production of HBMs, so the tight supply situation for conventional DRAM is likely to continue. Furthermore, if the demand recovery for conventional DRAMs accelerates, it is possible that the profitability of conventional DRAMs, which are priced on a quarterly basis, may be higher than that of HBM, which is priced on an annual contract basis. As HBM has many new aspects that make it different from conventional DRAM, we will seek to maximize DRAM profitability, over the long term rather than the short term, taking into account the growth and stability of HBM's revenue, our position in the market, and our relationship with the customers. Next question, please. The next question will be presented by Sung Kyu Kim from Daiwa Securities. Please go ahead with your question. [Foreign language] Thank you very much for this opportunity to ask my question. First of all, let me congratulate you on your excellent performance. I have a question on HBM. So it is said that the packaging technology of the 12-high product is said to be more difficult than the 8-high product. So when do you expect to reach the material stage? And when do you think the HBM3E 8-high and the 12-high products will cross over each other? Those are my questions. [Foreign language] Thank you for the question. As I have noted previously, the HBM3E 12-high samples were provided to customers in May, and we are currently preparing for mass production, and we plan to start mass production this quarter and start supplying customers in Q4. [Foreign language] Demand for the 12-high product is expected to increase in earnest from next year, and we expect the supply of HBM3E 12-high to exceed that of 8-high in the first half of next year. [Foreign language] Although it is true that the technicality or technical difficulty involved for the 12-high product is higher than the 8-high product, we believe that our experience in mass producing the HBM3 12-high and the successful development and production ramp up of the 8-high product will shorten the time required to ensure stable quality and yield. [Foreign language] Next question, please. [Foreign language] The next question will be presented by Giuni Lee from Goldman Sachs. Please go ahead with your question. [Foreign language] Thank you very much for this opportunity to ask my question. I also have a question related to the HBM. So the HBM's product development period seems to be shortening as major GPU customers have shortened their product release intervals from 2 years to 1 year. Do you think these industry changes are favorable or unfavorable for, for SK hynix as HBM market leader? And does this change the mid- to long-term HBM TAM outlook? [Foreign language] Thank you for the question. As the AI market is expanding faster than expected and related industries are growing faster, some customers are responding to the market growth by accelerating their new product release cycles. [Foreign language] Faster GPU release cycles require shorter development cycles for the HBMs, HBMs employed in those, GPUs, and this can be a burden for the DRAM companies. [Foreign language] However, the environment is likely to be favorable for industry leaders who can respond to these customer demands, especially as time to market is of the essence, and it is important to minimize risk by partnering with industry leaders who have the right combination of technology, competitiveness, mass production experience, and the scale. [Foreign language] We also believe that shorter time to market for new products will help to stimulate market demand, and this is expected to expand the size of the AI market and positively impact the generation of demand for HBMs. [Foreign language] Next question, please. [Foreign language] The next question will be presented by Ricky Seo from HSBC. Please go ahead with your question. [Foreign language] Thank you for this opportunity to ask my question. I also have a question about the HBM4. So, in the HBM4 product range, there is the 12-high product and the 16-high product. And there is a lot of. So my first question is, when will the HBM4 12-high and the 16-high product be released? And my second question is, there's currently a lot of discussion about when to apply the Hybrid Bonding technology. So, when do you intend to apply the Hybrid Bonding technology in the HBM4 16-high? And, my third question is, what are the considerations made when deciding to use the technology? [Foreign language] HBM4 is expected to be shipped from the second half of next year, starting with the 12-high products, and we plan to apply the Advanced MR-MUF technology for mass production. [Foreign language] The hybrid bonding technology that you have referred to is a technology that we are researching to reduce the height of the packaging by joining the pads of the copper wiring directly to each other, without micro bumps between the chips, so that we can prepare for the ever increasing number of stacks. [Foreign language] The effectiveness of applying the hybrid bonding technology may vary from company to company due to the different packaging technologies currently used by the HBM suppliers and their different capabilities and resources. [Foreign language] Furthermore, the mass production application of hybrid bonding requires further technological advancement and thorough characterization and quality verification at the system level, in collaboration with customers and partners. [Foreign language] The HBM4 16-high product is expected to be in demand in 2026, and we plan to develop it in preparation for that demand. We are reviewing both the advanced MR-MUF and the hybrid bonding methods to select the most optimal method to meet customer demands. [Foreign language] Next question, please. [Foreign language] The next question will be presented by Sun-woo Kim from Meritz Securities. Please go ahead with your question. [Foreign language] Hello, I am Sun-woo Kim from Meritz Securities. Thank you very much for giving me this opportunity to ask my question. I have a question related to the bit growth of NAND. So, you have very strong performance for the first quarter and the second quarter. However, in comparison to that performance, your shipment level seems to be rather weak. The second quarter shipments have been below guidance, and, for Q3, as well, it is expected to be down QOQ. So how long do you think this trend will continue going forward? [Foregin language] With the exception of enterprise SSDs, where demand for NAND is clearly growing, general applications such as PC and mobile, demand is still showing a modest recovery, and we are responding to market conditions by maintaining our strategy of optimizing investments and improving profitability. [Foreign language] For instance, we are ramping up production on a limited base this year, which was reduced last year due to NAND investment minimization and production capacity cuts. We're focusing this year on select applications where demand is growing. [Foreign language] While our quarterly NAND shipment growth may appear limited this year, we are committed to maintaining our market share by revenue through our profitability-focused product mix and sales strategy based on actual demand. [Foreign language] In the third quarter, while expanding sales for Enterprise SSD products, we plan for a mid-single digit shipment decrease in some applications due to low demand and customer inventory conditions. [Foreign language] In the fourth quarter, we expect shipments to return to growth as more bits are produced internally and the external demand environment improves. [Foreign language] Looking ahead to next year, we will continue to optimize investments and improve profitability, positioning the business to be profitable even in the face of future market fluctuations. Next question, please. The next question will be presented by Seok-hwan Shin from Daishin Securities. Please go ahead with your question. [Foreign language] I'm Seok-hwan Shin from Daishin Securities. Thank you very much for this opportunity to ask questions. My question has to do with the reversal of inventory valuation allowance. So, what was the size of the reversal of the inventory valuation allowance in the second quarter? And if prices continue to rise in the second half of the year, is there a possibility of further reversals? [Foreign language] Let me take the question on inventory valuation allowance reversal. So our DRAM sales volume in the second quarter exceeded our guidance, and our finished goods inventory level at the end of the second quarter decreased from the end of the previous quarter as sales of DRAM and NAND continued to exceed production volumes. DRAM and NAND prices continued to increase, resulting in a reversal of Inventory Valuation Allowance of approximately KRW 300 billion in the second quarter. [Foreign language] As the pricing environment for DRAM and NAND is expected to remain favorable going into the second half as well, there is the possibility of further reversals taking place, but as the majority of the Inventory Valuation Allowance has been recognized during the downturn, has been reversed. Further reversals are expected to be minimal. [Foreign language] Next question, please. [Foreign language] The next question will be presented by Min-sook Chae from Korea Investment & Securities. Please go ahead with your question. [Foreign language] I'm Min-sook Chae from Korea Investment & Securities. Thank you very much for this opportunity. I have a question related to HBM. Given that HBM demand is growing rapidly and SK hynix's leadership in the market is widely recognized, you seem to be taking a conservative stance when it comes to the capacity increase. So why are you not increasing HBM capacity more aggressively? And what are your plans for HBM capacity to meet demand next year? [Foreign langauge] Thank you very much for that question. Now, contrary to some concerns, AI-driven demand has continued to exceed expectations and is growing this year. [Foreign language] We have previously announced that we will more than double our TSV capacities from last year's level to meet the growing demand this year, and we expect to rapidly expand the supply of HBM3E, based on the increased TSV capacities and 1b nm of conversion investment this year, resulting in HBM revenue growth of over 300% compared to last year. That is our expectation. [Foreign language] We are very carefully crafting our investment plans and capacity-related plans by reflecting the demand in the downstream and also the supply chain situation. [Foreign language] Most of next year's CapEx has already been largely agreed with the customers, and we expect shipment growth to more than double compared to this year. [Foreign language] 12-high product will become the main product, but we are also preparing for HBM4 without delay to stably respond to customer demand. Next year, the HBM3E 12-high product will be our flagship product, and we will also finalize preparations for the HBM4 to ensure a stable response to customer demand. [Foreign language] The last question, please. [Foreign language] The last question will be presented by Young Ho Ryu from NH Investment & Securities. Please go ahead with your question. [Foreign language] I am Young Ho Ryu from NH Investment & Securities. I have a question about NAND performance. So as you have already noted, the eSSDs are experiencing strong demand growth this year. And so how is the demand for eSSD, presently, compared to your expectations at the beginning of the year? And what is your outlook and strategy for eSSD going forward? [Foreign langauge] Last year, the demand for general purpose servers slowed down significantly due to a focus on AI-oriented servers within limited IT investment budget. And so as a result, enterprise SSD demand was weak. [Foreign language] This year, however, investment in general-purpose servers is increasing compared to last year, and AI-related demand, which was previously limited to DRAM, is spreading to NAND storage. And so eSSD demand is growing at a level that is significantly, significantly exceeding expectations at the beginning of the year, mainly for high-density products. [Foreign language] Due to the high power consumption of AI servers, the preference for low power storage products is expected to grow, and we plan to respond to this growth with a diverse lineup of enterprise SSD products to meet customer demand. [Foreign language] We are currently the only company in the industry to offer QLC-based enterprise SSD products over 60 TB, and the quality of our products is highly competitive. We plan to maintain our high density product leadership by introducing 128 TB and later on, 256 TB products later this year. [Foreign language] Our eSSD products also have very strong QoS advantage based on our deep understanding of data center workloads. QoS stands for Quality of Service, which means that the response time to read and write data is short and reliable, which in turn means less time waiting for the SSD to respond, and this can increase the efficiency of the GPU. [Foreign language] In the future, power efficiency will be a critical factor for AI servers, and high density eSSD products with a strong performance and reliability will be very attractive to customers in terms of TCO. So we're looking forward to further growth in the high density storage market for data centers. [Foreign language] Based on these competitive advantages, we're going to increase our sales volume to fourfold that of the previous level, and we will expand the proportion of eSSD sales to half that of NAND this year and strengthen our position as the top two player in the high growth eSSD market. [Foreign language] With this, we'd like to conclude the SK hynix 2024 Q2 earnings release conference call. Thank you very much.