⚠ Margins This High Invite Their Own CorrectionHigh threat

SK hynix (SKHY) — threat to the moat

A 76 percent operating margin in a commodity industry is not a result; it is an advertisement, and every competitor and customer has read it.

An operating margin of 76%1 in a commodity industry is not a stable state. It is an advertisement.

Operating margin, latest quarter (%)76.3%SK hynix, Q2 202680.4%Micron, May 2026 qtrSK hynix semi-annual report; Micron Form 10-Q (operating income $33,318M on $41,456M)
Two of the three producers earning three-quarters of revenue as operating profit invites capital.

It tells competitors exactly how much money there is in adding capacity, which is why all three producers are building. It tells customers exactly how much of their own cost structure a supplier is capturing — and one of them has already said so in public, guiding its gross margin down to 74.0% on higher memory costs2. And it tells capital markets to fund anyone with a credible plan to participate.

The correction does not require bad behaviour. It requires ordinary rational behaviour, in sequence, which is reliable.

What determines how far it goes is whether demand absorbs the capacity. Gartner's forecasts, cited in SK hynix's own prospectus, have DRAM revenue rising from US$143 billion in 2025 to US$401 billion in 2027, with high-bandwidth memory going from US$33 billion to US$86 billion3 — enough, if it happens, to absorb a great deal of building.

The number to watch is operating margin itself, quarter by quarter. Its direction over the next two years is the entire investment question, and it is already being answered from the customer's side.

References
  1. ReportedAn operating margin near 76% in the second quarter of 2026.
    SK hynix Inc., preliminary results of operations for the second quarter of 2026 (SEC Form 6-K, 29 July 2026) — revenue W 79,318,746 million, up 50.9% on Q1 2026's W 52,576,287 million and 256.8% on Q2 2025's W 22,231,952 million; operating profit W 60,542,608 million, up 61.0% sequentially and 557.2% year on year, an operating margin of about 76%; profit before income tax W 122,708,355 million; profit for the period W 93,922,593 million. First-half 2026 revenue W 131,895,033 million, operating profit W 98,152,891 million and profit W 134,268,502 million. Prepared on a consolidated basis under K-IFRS and unaudited. — Q2 2026 (quarter ended 30 June 2026) · publ. 2026-07-29 · source ↗
  2. ReportedNVIDIA guided its next-quarter gross margin to 74.0%, plus or minus 50 basis points, on higher memory costs.
    NVIDIA, Q2 FY2027 financial results (Form 8-K, exhibit 99.1) — revenue of $96,221M for the quarter ended 26 July 2026, up 18% sequentially and 106% year on year; Data Center revenue of $89.0 billion, up 18% sequentially and 117% year on year; GAAP and non-GAAP gross margins both 75.0%, against 74.9% in Q1 FY2027 and 72.4% a year earlier; operating expenses $8,408M; operating income $63,734M, up 124%; GAAP net income $59,688M, up 126%; GAAP diluted EPS $2.46 against non-GAAP $2.22, the two having crossed because from Q1 FY2027 NVIDIA's non-GAAP measures no longer exclude stock-based compensation expense; approximately $26.0 billion returned to shareholders in the quarter with roughly $99.0 billion remaining under the repurchase authorisation; six-month FY2027 revenue $177,837M and net income $118,010M. Outlook for Q3 FY2027: revenue of $108.0 billion plus or minus 2%, with NVIDIA not assuming any Data Center compute revenue from China; GAAP and non-GAAP gross margins of 74.0% plus or minus 50 basis points. Jensen Huang: 'AI has reached its inflection point... Vera Rubin, now in full production, was built to power exactly this moment.' — Q2 FY2027 (quarter ended 26 July 2026) · publ. 2026-08-26 · source ↗
  3. Third-party estimateGartner forecasts DRAM revenue rising from US$143bn in 2025 to US$401bn in 2027, and HBM from US$33bn to US$86bn.
    SK hynix Inc., Form 424B4 prospectus for its Nasdaq offering (SEC, CIK 2120882) — FY2025 revenue W 97,147bn, cost of sales W 38,456bn, gross profit W 58,691bn, S&A W 5,019bn, R&D W 6,466bn and profit for the year W 42,948bn, against FY2024 revenue W 66,193bn / profit W 19,797bn and FY2023 revenue W 32,766bn / cost of sales W 33,299bn / gross loss W 533bn / loss for the year W 9,138bn; Q1 2026 revenue W 52,576bn, gross profit W 41,679bn, profit W 40,346bn. IDC market shares for Q1 2026: second in DRAM at 29.1%, first in HBM at 56.4%, second in NAND at 18.5%, with the three DRAM producers together above 90% of revenue. DRAM products were 77.1% of total sales in 2025 and 77.3% in Q1 2026; NAND 21.3% and 22.0%. Competitors named: Samsung Electronics, Micron Technology and CXMT in DRAM; Samsung Electronics, Kioxia, Micron Technology and Sandisk in NAND; competitive factors listed as 'pricing; manufacturing costs, yields and product availability; product performance, quality and reliability'. First to develop HBM using TSV packaging, commercialised HBM3E in 2024 and developed HBM4 in 2025; HBM carried a per-gigabyte price premium of more than five times traditional DRAM in 2025. M15X cleanroom opened October 2025 with wafer input from Q1 2026; Yongin construction began February 2025 with the first fab's phase-one cleanroom expected Q1 2027; an advanced packaging plant (P&T7) is under construction in Cheongju and one is planned in Indiana for the second half of 2028. Intel's NAND business cost US$6.6bn in December 2021 plus US$2.2bn in March 2025, operated as Solidigm; NAND mass production is transitioning from 176-layer to 238- and 321-layer technologies. Gartner forecasts DRAM revenue of US$143bn in 2025 rising to US$401bn in 2027, HBM US$33bn to US$86bn and NAND US$68bn to US$341bn. A substantial portion of sales is attributable to a limited number of customers located in the United States and China; the two largest were 14.8% and 12.4% of revenue in Q1 2026 and the largest was 23.9% of revenue in 2025. The offering was 177,900,000 ADSs at US$149.00, each ADS one-tenth of a common share, representing 17,790,000 shares against 712,702,365 outstanding; Baillie Gifford, Coatue and Situational Awareness Partners indicated non-binding interest of up to US$7bn. — FY2023-FY2025 and Q1 2026 · publ. 2026-07-10 · source ↗
Sources
Generated September 23, 2026