Chips: SK Hynix Sees 30% Annual Growth; Nvidia's H20 UnSafe?

South Korea’s SK Hynix forecasts that the market for a specialized form of memory chip designed for artificial intelligence will grow 30% a year until 2030.

A senior Hynix executive interviewed by Reuters gave that upbeat projection for global growth in high-bandwidth memory (HBM) chips used in AI, and brushed off concern over rising price pressures in a sector that for decades has been treated like commodities such as oil or coal.

“AI demand from the end user is pretty much, very firm and strong,” SK Hynix’s Choi Joon-yong, head of the group’s HBM business planning, said.

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The billions of dollars in AI capital spending that cloud computing companies such as Amazon, Microsoft and Alphabet’s Google are projecting will likely be revised upwards in the future, which would be “positive” for the HBM market, Choi said.

The relationship between AI build-outs and HBM purchases is “very straight forward” and there is a correlation between the two, Choi said. SK Hynix’s projections are conservative and include constraints such as available energy, he said.

But the memory business is undergoing a significant strategic change during this period as well. HBM – a type of dynamic random access memory or DRAM standard first produced in 2013 – involves stacking chips vertically to save space and reduce power consumption, helping to process the large volumes of data generated by complex AI applications.

SK Hynix expects this market for custom HBM to grow to tens of billions of dollars by 2030, Choi said.

Due to technological changes in the way SK Hynix and rivals such as Micron Technology and Samsung Electronics build next-generation HBM4, their products include a customer-specific logic die, or “base die”, that helps manage the memory.

That means it is no longer possible to easily replace a rival’s memory product with a nearly identical chip or product.

Part of SK Hynix’s optimism for future HBM market growth includes the likelihood that customers will want even further customisation than what SK Hynix already does, Choi said.

At the moment, it is mostly larger customers such as Nvidia that receive individual customisation, while smaller clients get a traditional one-size-fits-all approach.

“Each customer has different taste,” Choi said, adding that some want specific performance or power characteristics.

SK Hynix is currently the main HBM supplier to Nvidia, although Samsung and Micron supply it with smaller volumes. Last week, Samsung cautioned during its earnings conference call that current generation HBM3E supply would likely outpace demand growth in the near term, a shift that could weigh on prices.

“We are confident to provide, to make the right competitive product to the customers,” Choi said.

100% Trump tariff

US President Donald Trump on Wednesday said the United States would impose a tariff of about 100% on semiconductor chips imported from countries not producing in America or planning to do so.

Choi declined to comment on the tariffs.

Trump told reporters in the Oval Office the new tariff rate would apply to “all chips and semiconductors coming into the United States,” but would not apply to companies that were already manufacturing in the United States or had made a commitment to do so.

Trump’s comments were not a formal tariff announcement, and the president offered no further specifics.

South Korea’s top trade envoy Yeo Han-koo said on Thursday that Samsung Electronics and SK Hynix would not be subject to the 100% tariffs on chips if they were implemented.

Samsung has invested in two chip fabrication plants in Austin and Taylor, Texas, and SK Hynix has announced plans to build an advanced chip packaging plant and an artificial intelligence research and development facility in Indiana.

South Korea’s chip exports to the United States were valued at $10.7 billion last year, accounting for 7.5% of its total chip exports.

Some HBM chips are exported to Taiwan for packaging, accounting for 18% of South Korea’s chip exports in 2024, a 127% increase from the previous year.

Nvidia’s H20 chips ‘not safe’

Shares of SK Hynix closed up 4.1% on Monday after rising as much as 4.3%, versus a 0.1% drop in the benchmark KOSPI.

Shares of SK Hynix so far this year are up 53.5%, outpacing KOSPI’s 33.6% gain. Shares of Samsung Electronics are up 33.5% and Micron has climbed 41.3%.

Nvidia’s H20 chips pose security concerns for China, a social media account affiliated with China’s state media said on Sunday, after Beijing raised concerns over backdoor access in those chips.

The H20 chips are also not technologically advanced or environmentally friendly, the account, Yuyuan Tantian, which is affiliated with state broadcaster CCTV, claimed in an article published on WeChat.

“When a type of chip is neither environmentally friendly, nor advanced, nor safe, as consumers, we certainly have the option not to buy it,” the article concluded.

H20 artificial intelligence chips were developed by Nvidia for the Chinese market after the US imposed export restrictions on advanced AI chips in late 2023. The administration of US President Donald Trump banned their sales in April amid escalating trade tensions with China, but reversed the ban in July.

China’s cyberspace watchdog said on July 31 that it had summoned Nvidia to a meeting, asking the US chipmaker to explain whether its H20 chips had any backdoor security risks – a hidden method of bypassing normal authentication or security controls.

Nvidia later said its products had no “backdoors” that would allow remote access or control. The company reiterated its position on Sunday when asked for a comment on Yuyuan Tantian’s article, saying its chips had no backdoors.

In its article, Yuyuan Tantian said Nvidia chips could achieve functions including “remote shutdown” through a hardware “backdoor.”

Yuyuan Tantian’s comment followed criticism against Nvidia by the People’s Daily, another Chinese state media outlet.

In a commentary earlier this month, People’s Daily said Nvidia must produce “convincing security proofs” to eliminate Chinese users’ worries over security risks in its chips and regain market trust.