SK Group Chairman Chey Tae-won on SK Hynix's massive memory expansion — full interview

[00:00:00] Speaker 1: Chairman Che, thank you so much for having us at SK Hynix here in Korea. I wanted to start out by asking you, you know, you are in charge of a lot more than just this company. But how important is memory within SK Hynix, even though you have more than 100 subsidiaries? [00:00:15] Speaker 2: Yes, this is AI era. So people need a lot of memory. So it's the AI. So right now, what I really believe, AI is a kind of small child. It's four-year-old only. But, well, as they grow, they may need much more functions, and they need a lot of experience and more knowledge. Then you have to store some, those kind of knowledge in somewhere. Like a human, human need that, well, in a child, you have some small brain, and there's not much memories. But if you become an adult, then you had a lot of experience, you had a lot of memories and wisdom. So I think that the AI is almost the same thing. And, well, so that's why we need that lot of memory and that memory chips in the AI side. So, but among that, our subsidiaries, so, well, the Hynix, yeah, Hynix is the biggest subsidiaries right now. So, well, that's no wonder. But for the AI, we need the energies and the networks too. So, in that sense that our own portfolio, we have energy company and network companies called the telecommunication company right now. But, well, they are trying to make that AI data center in the future. So, we have some kind of optimized that our own portfolio, what I'm saying. So, yes, but you are right. Right now, as Hynix says, it's the most important piece of the portfolio. [00:02:05] Speaker 1: And it wasn't always a semiconductor company. Your beginnings were in textiles. I got to see the museum yesterday. When and how did you decide, and was it you who decided to make this a semiconductor company? [00:02:19] Speaker 2: Well, yes. That was, well, 2012. So, what I really decided, we needed some other portfolios, because we already had some portfolio for the energy side and the chemical side and telecommunications. But what I really needed, some other global business. So, also, in a digital era at the time, as a, well, what I really see that, I don't see that the AI at the time, but I really believe that digital, digital society also needed a lot of memories. So, you have to actually put in a lot of knowledge and the data and put it in the software. So, well, that's, naturally, that storage is a memory chips. That's, I just go for that, those companies, and, yeah, this might be the future. So, I made it a very risky bet at the time, but, yeah, right now, as a, well, actually, well, one of the biggest and the successful bet in my life. [00:03:38] Speaker 1: You're making another really big bet now, 720 billion US dollars to build it out. How do you tell people that the long-term sustainable business can sustain that kind of investment? [00:03:51] Speaker 2: Well, if you see that it's the demand forecast, like, well, people probably using the more AI agent. So, in the future, as an AI agent, what I really see in the, well, compared to 2025, and I think that 77 times full within the five years. So, then much AI agent probably, it'll be the whole world. So, that also requires a lot of memories. So, what I really see is that the memory increase in the total volume is within 10 years, I guess, almost five times current, the production capacity. So, demand is enormous. So, what I really believe that in order to meet the world, those kind of demand, and we have to actually expand very quickly. So, that's what I really decide, and, well, we should expand our supply capacity. [00:04:58] Speaker 1: Right here, we have a wafer with a signature on it. Yes. [00:05:03] Speaker 2: So, that's the Jensen's, yes. [00:05:06] Speaker 1: Is he one of your friends, and who are some of your other friends in the AI world? [00:05:11] Speaker 2: Oh, well, mostly the hyperscaler, the Microsoft Satya, and Google Sundar, and, well, Mark and Meta, and, well, you mentioned, everybody needed our customers, and mostly, well, they are my friends. They are my friends, and, well, I occasionally meet them. [00:05:36] Speaker 1: How about TSMC? [00:05:37] Speaker 2: Oh, of course, yeah, CCA, yeah, well, I just met him about a month ago, so I visited Taiwan, and we had dinner together, so we exchanged a lot of information and the forecasting in the future, so, yes. So, yeah, he also believed that the AI is a real technology, and we have actually expanded our capacity a lot, and not only, well, even though there is a lot of memory, if TSMC capacity is limited, then, well, there is not much GPU, and vice versa. So, yeah, so even though TSMC capacity is a lot, but, well, if there is not enough HBM, then, well, there is no use, so. [00:06:24] Speaker 1: Yeah, I mean, getting. [00:06:25] Speaker 2: So, we have to actually make, yeah, partnership together and working together, so, well, that's the kind of relationship with TSMC, too. [00:06:34] Speaker 1: Right, they're producing your base dye, correct? Right. How do you, how do you get enough capacity on their manufacturing lines? I mean, everybody is lining up to try to get that capacity. [00:06:43] Speaker 2: Well, well, he knows that, well, that's the important pieces, because without them, and there is no AI productions, especially in the GPU side. So, no matter how, he had that, well, the demand is overwhelming, but I believe that he's going to make that our base dye, of course. [00:07:11] Speaker 1: Back to Jensen, how important is NVIDIA as a customer? [00:07:15] Speaker 2: Well, it's the most important customer right now, so, he's also developed, developed the product, and the new product in every year. So, that kind of speed is, well, I always admired those things, and we also pushed that, well, new chips and the new technology, yeah, alongside with him. So, that's one of the really, really good companies, really admirable companies in the world right now. So, I still believe that in the future, so, they are dominant, and they actually had a lot of technologies, not on just GPU side, and so, he tried to make the AI ecosystems within, well, the friends together. So, not only does he, his own company, but he actually made a lot of different type of partners, and he tried to make that ecosystem together. That's the most important matter. [00:08:18] Speaker 1: Yeah. Does it create risk to have so much of your business with one customer, NVIDIA? [00:08:26] Speaker 2: So, without NVIDIA's, well, AI ecosystem is not there, so, actually, he created a lot of the solution for the AI infrastructure, without his productions, so, I have to actually support that, as much as I can do it, that's a kind of important matter, but, well, he's not only our customers. So, I always said, some of the other customers, like Google's, and Microsoft, and other, yeah, hyperscalers, but, yeah, but some of them, they make the chips, but, well, right now, scale is, Johnson, Jensen's company is the largest. So, well, that's actually, well, I'm not really dependent on just one customer, but, well, yeah, I just want to solve that the largest customers in the world, right now. [00:09:27] Speaker 1: Are any of these customers helping you with this build-out? Can they do anything to help you ramp capacity fast enough to help them fill their demand, help you fill their demand? [00:09:37] Speaker 2: They're always asking more chips, so, that's the one thing, and, well, I'm trying to, well, bring some solutions, but right now, kind of, demand is a kind of a, it's kind of explosive things, and especially, it just occurred that, that, that last year, if we want to expand the capacity, so, well, we need a lot of lead time, at least at the four to five years, so, probably next year is at the hardest year, because that, well, all of the memory companies are not actually prepared to expand their capacity yet, but still demand is growing, I think that the demand is growing twice than this year. Actually, yeah, all of my customers are asking, yeah, almost double up to their demand, so, they're asking more chips in the next year, but, yeah, supply is not there, so, it's kind of, I don't know about how to say, it's like a, it's like a war between that, Everybody wants to say, everybody wants to set up their memory chip, without that, they cannot produce it, they are AI computing and AI chips, and, yeah, also, well, one of the, one of the bad thing is, the prices went up too fast, So, I think that, I think that, there is a problem with the, the PC manufacturers and the smartphone manufacturer consumer electronics and, even automakers have such some difficulty to find that the chips and, well, some of them, even though there is chip is too expensive, So, so, one of the, my job is that, I want to make, defend that the, all those, the memory market, and I'm trying to actually expand that as much as I can, and as much as I, as fast as I can, so. [00:11:40] Speaker 1: Yeah, memory prices have gone up 40, 50%, do you anticipate seeing that continue, I mean, Apple, one of your customers, has had to raise prices on their flagship products, are we going to see that continue? [00:11:52] Speaker 2: Well, that's, well, that's one of, what we call the chiplation, yeah, the price of the chip is too high, and, yeah, even, yeah, play like Apple, then, they have to raise the price, and, so, that actually, increase all the prices to the society, so, that's not, that's not really good, so, I don't want that, so, I don't want that, but, it just happens, so, I don't have any solution in a, in a short run, but, I, yeah, well, that's why, I put it in the, more, huge money, yeah, scheduled to expand that, the, the fab, so, I already announced that, within five years, we're going to double up our capacity, but, most of the, the customer, that's not enough, So, we need more, so, that's, that's the kind of problems right now, but, physically, some, some, it's not possible, so, so, that's the, one of the, well, problem with the, well, that's what we call that, the AI bottlenecks, yes, so, right now, as a memory chip is, yeah, AI bottlenecks. [00:13:07] Speaker 1: DRAM is about three quarters of your revenue. One solution that others are exploring is trying to architect chips that need other things aside from DRAM to try to do AI. Does that create any risk? [00:13:27] Speaker 2: No, technology is just an evolution. Well, evolve anytime. DRAM is just based on things and with the DRAM and we actually stack up and make an HBM and we might add that one other solution for the CXL type and there is a various type of technology which can actually support the HBM. AI data centers. So, in the future there is a few options, but I think that our company is actually full support at every possible way to expand the memory capacity and well our final target is how we can actually lower down the token cost for the AI and right now what I really believe is a token price is too high. So, we have to actually push down the more so otherwise that well people have to spend too much money for the tokens. [00:14:44] Speaker 1: One analyst told me that memory companies in Korea historically have put a lot of focus on CapEx to try to get market dominance. Sometimes, you know, at risk of when the bust happens, you've overbuilt. What do you say? [00:15:03] Speaker 2: Yeah, we always carefully doing that and we just announced that the huge expansion plan. But, well, that's only the condition and demand is there. So, we actually every time and we're going to expand and we will check demand is there. And our customer made it to some long term agreement with us. And we also added the various program to how we can actually share. care of those kind of risk together. What kind of programs? And well, we might share that there's some risk on that. And we don't want the oversupply. We don't want the oversupply. But we don't also really want the undersupply either. So, we always check. And right now, another big thing is well, the HBM. People need a lot of people need a lot of people need a lot of people need a lot of AI accelerators in these days and probably every country and every society wants to have those things. And in order to get there is that we actually produce a lot of HBM, but the problem is HBM. Once you expand that those kind of HBM and it actually consumes in more than four times of the normal DRAM. It actually eat up the space of the space of the space of the space of the space of the vapors. That's the kind of problems. But what can we do? So, well, we have to do it. And that's why actually we produce that a lot of vapor capacity. So, but I don't really think that well, you said that we are right. There is some risk on the oversupply. But we already noticed that and we carefully confirm that the older demand and the inner futures. [00:17:34] Speaker 1: How have you seen the length of contracts or the terms of contracts change because of this? [00:17:40] Speaker 2: Number one is that that's not just come from off. Actually, the customer wants those kind of long term agreement because they have to secure that the memory side. And so. So. So if customer wants and the will provide those things and well, if you want to only money making the view, then it doesn't really help us that right now as a shortage of demand. And I don't want to have to have that we are fixing some price and demand. Yeah. Well, those kind of long term agreement, but I wanted to have that some comfort drawn to especially the our customers. So we, yeah, we are offering to the long term agreement and we checking that that's one thing and we got to secure that those kind of demand and every year we have to check it and we're going to expand that those long term agreement year by year. So that's the one thing and we can do it together. So yeah, let's just check and don't don't make it the over investment or the under investments. [00:18:53] Speaker 1: I heard that the hotels around Korea have been packed with tech tech moguls coming here to try to sign these long term contracts. Is that true? [00:19:03] Speaker 2: Right, right. But yeah, as I told you as well, probably next year is the worst year for that the memory shortage. So there's a lot of people's wants to buy that try to find it that will find the chips, but wow, our supply capacity is limited right now. So yeah, that's why whenever I met our customers, I'm really sorry about this. But well, if everybody wants that all the chips, then I cannot just provide the auto medical is so well, but I'm trying to my best. So that's the only things. But yeah, next year is a kind of worse year for that the chips shortage wise. [00:19:57] Speaker 1: 2023 was a hard time for you. Yes, you kept going 1997. That was also, you know, the company just oh, yes. Yeah, near bankruptcy. This time, what's going to be different this time? [00:20:15] Speaker 2: I don't really believe that this time is a different but wow. But one thing different as well, we have to deal with the new things, new baby, the AI. So AI, AI actually changed our society. So also that AI consumes a lot of resources, as you know, and they're going to add up a lot of energies, the powers and the materials, the silicones, even waters. So also that it just created that the intelligence, not like all days, the old days we produce it, the just product. But yeah, people can use it to these intelligences differently. So we can be much smarter, happier. So also there is some danger. I know that. But we have to carefully watch out for that kind of dangers. But in general purpose of the AI could actually help that relief from the human side is labor. But AI actually makes us that there is not much difference between the people to people. So that actually gives us much more relief from the tension of the whole society. That's what I really believe that's actually the benefit of the AI side. So we don't have the hard walks. And we also heard that there were no difference in the inner people than what we might have that there was some, yeah. There's more chance to we can make that a happy society. [00:22:08] Speaker 1: Speaking of power and water, you've mentioned that those resources are more important when choosing where to build than geography. Right, right. Does the U.S. have enough resources to support an HBM4 production facility? [00:22:23] Speaker 2: Well, what about as the ecosystems for the memory chips? I could, yeah, well, if you see that the world, that nice, big, the memory, the fab. But in the behind the scene, there is almost 600, 700 different company has to, yeah, support their material, chemicals and services. Otherwise, they cannot really survive. So that's one of the biggest problems. Well, every country wants to build the memory fab in their territory. So, but if there is water powers and land, and also the problem is that the ecosystem. So if I can bring that ecosystem together, then, well, then I'm going to build that anywhere. Anywhere in the U.S., including U.S. and anywhere in the world. So our study team is really looking for that, yeah, all those, where is a real possible opportunity and how fast we can build that, the new fab. And that's how we can relieve that, this shortage of the memory. [00:23:50] Speaker 1: You have the site coming to Indiana in the U.S. You've, your SK Hynix has denied reports that you are acquiring another project, you know, from another partner. But the U.S. government, the U.S. Commerce Secretary, just in July, has put the pressure on for you and Samsung to bring a full memory fab to the U.S. What are your plans? [00:24:18] Speaker 2: Well, as I told you that, well, we've been studying. So I cannot just announce that, yes, we're going to build that fab in somewhere. But where? And we have to actually decide in the inside that which, when and how. And well, we need much more of the details. And we also need a lot of contracts together. Yeah. But you're working on it. We are working on it. So not only just the U.S. and the whole world. And I'm looking for that, some, some expansion. The, yeah, I'm willing to do it. And, but the problem is that I really had to find the right place yet. So, yeah, to tell you the truth. And, yeah, we've been studying more than a month. And. [00:25:12] Speaker 1: Studying the U.S. Yeah. [00:25:14] Speaker 2: Well, U.S. also study. And, yeah, some of us and, well, we also study together. [00:25:20] Speaker 1: So. Are you getting calls from the U.S. government or customers saying build in the U.S., build a fab in the U.S.? [00:25:27] Speaker 2: Well, U.S. customer wants to build the fab in U.S. So. [00:25:33] Speaker 1: Well. And the government. Yeah. [00:25:36] Speaker 2: I actually haven't actually talked with the, well, directly with the government yet. So, but this is kind of business. So, if customer wants it and, yeah, I'm really want to pursue that, this kind of opportunity together. [00:25:52] Speaker 1: Mm-hmm. What is your advantage over Samsung and Micron? [00:25:56] Speaker 2: Oh. [00:25:57] Speaker ?: Oh. [00:25:58] Speaker 2: Oh. Oh. Well, I can say a lot of different things. But the Hynex, as you know, that is under the Chapter 11 companies. With, they've been there in more than 10 years. Yeah. So, they are really hungry. So, what they, what we call is a Tokata. I mean, it's a really hesitant to find the spirit. So, without that much of the resources and, well, they actually make this, make something out of, yeah. Within a world, they are spirit. So, what I really believe that their teamwork is really good. And, well, generally as a, it's kind of a spirit. What I really believe. Well, technology-wise, it's almost the same thing. Resource-wise, well, probably some company has the, the, the, the bigger resources. But, well, we have enough resources. So, it's money or the, the, the, the, the, the engineers, engineering power. So, it's almost a similar. But, well, I guess that the Tmog and Spillit makes some, it could make some, the changes. [00:27:25] Speaker 1: Hmm. One way you're getting more money is from proceeds on the U.S. markets. How was debut day for you? How have you felt about the performance on the U.S. market since? [00:27:35] Speaker 2: Well, there's a kind of big movement. Even though it's just the first step, but that first step into that global financial market. And I see that the, well, there's a new, uh, shareholders and, uh, new financial supporters. I see that, well, uh, that's kind of a big opportunity for us. And, uh, we can, we can add that a lot of different type of options, financially and the market-wise. And, well, even, I have, yeah, better, uh, I have option to, uh, make the better incentive to the, the, uh, the, the potential, uh, the candidate from the engineering peoples in, in U.S. side. So, it's, uh, well, that's, uh, that's, uh, that's why actually we decided to, uh, uh, open up the, uh, new, uh, R&D centers in the, in U.S. side. And also the Indiana Fabs. And, uh, well, we, we've been actually thinking about the potential, a lot of, uh, other investment, especially the AI side. That's why, uh, actually we set up with that, the, what we call that the U.S. AI company. So, that actually, well, investing a lot of money, uh, in the AI side. [00:28:56] Speaker 1: Yeah, $10 billion for that. What is that company? [00:28:59] Speaker 2: What we call that, we try to access that to U.S. technology. So, we bring that to our own, uh, the memory technology, but, uh, well, also I needed a lot of other technology to a system knowledge and, uh, other AI technology together. And we may have at the world better solution for the AI data centers and the AI infrastructures, AI software. So, uh, well, these days, uh, uh, all the software has to actually link with it, the hardware together. So, uh, but U.S. has the really good software engineers and you had really good, uh, software industry. But hardware-wise, uh, yeah, maybe the Koreans and Taiwan, uh, Japan has a little better, uh, the manufacturing facilities. So, well, we can actually add up together. And, uh, I hope that we can make it. And that's why we set up the company and for the investment, uh, for the AI side. [00:29:59] Speaker 1: I think your build out here is impressive. I've gotten to see it. It's, it's immense. And I'd love to have you close by telling us why that risk, that huge investment and that huge site that we've seen is going to be sustainable and last in something that's traditionally been a boom and bust cycle. Why is this time? Why is this time? Is it going to stay? I told you that the demand side. [00:30:24] Speaker 2: But, uh, what I really believe in the future is, uh, well, in the past cycle of that memory business is, uh, depends on the number of the people. Because, uh, the, uh, the number of the hardware set. So, without the hardware set, uh, actually, well, you're not really concerned that the, uh, the smartphone, uh, one at a time. So, uh, you're not going to buy that the tens of the smartphone, well, some day. So, but yeah, the number of people is kind of limited, uh, bounded by that the whole market. But AI era, as a, I think is a different, and you might have at the world 10 different, uh, your AI agent and help you. So, that, uh, all that agent has that, uh, is, uh, needed more memories. So, those kind of expansions. So, well, we, I, I don't want to say that the world, there is no cycle, but I want to say that the, it actually, the cycle movement has to change. So, it's a much longer, uh, cycle. Uh, I'm not really sure because that nobody really, uh, see that the world, whole, whole features. But I, I feel that, well, this is not a normal, uh, things and what we used to be the, in the memory business. So, this is a kind of turning point for us as, uh, what I see that, do I see that some structural change. So, that's what I see. And, uh, right now as my customer wants that a lot of, uh, the product, and I'm one, and I'm responsible to deliver those, uh, kind of product. And we'll see. And, uh, it might be that continue to, but I cannot just say to say that, uh, when and how, uh, it's gonna change that this market. Uh, I'm not really sure that, uh, in our, in our futures, but I see that the, in near future, I see some strong movement for the, uh, in the demand side. That's for sure. That's for sure. [00:32:28] Speaker 1: Chairman Che, thank you so much for having us here. Chairman Che, thank you so much for having us here. [00:32:31] Speaker ?: Chairman Che, thank you. [00:32:31] Speaker 1: Chairman Che, thank you so much for having us here. [00:32:32] Speaker ?: Chairman Che, thank you so much for having us here. Chairman Che, thank you so much for having us here. Chairman Che, thank you so much for having us here. Chairman Che, thank you so much for having us here. Chairman Che, thank you so much for having us here. Chairman Che, thank you so much for having us here. Chairman Che, thank you so much for having us here. Chairman Che, thank you so much for having us here. Chairman Che, thank you so much for having us here. Thank you. Che, thank you so much for having us here. Thank you. Thank you. Thank you.