SK Hynix Says Memory Is Sold Out Through 2029. Micron Is a Winner, Too

SK Hynix (NASDAQ:SKHY), the South Korean memory chipmaker, reported its third-quarter earnings on Oct. 28, and the results didn't disappoint. But while the company is marking a record-setting quarter and a big jump in stock price today, I think Micron Technology (NASDAQ:MU) shareholders have plenty of reasons to be excited as well.

SK Hynix reported that its production of dynamic random-access memory (DRAM) and high-bandwidth memory (HBM) is effectively sold out through 2029, with memory shortages expected to last through 2030. The company said long-term supply agreements, combined with customer contracts still under discussion, account for its expected production over the next three years.

"We expect it to be difficult to fully meet customers' volume requirements in the near term," Chief Financial Officer Woo-hyun Kim said on the company's earnings call. "Given the complexities involved in implementing leading-edge processes and the lead times required to construct new production facilities, a situation where supply cannot keep up with demand is expected to persist for some time, a constraint projected to continue through 2030."

That's outstanding news for SK Hynix. But it could be equally important for Micron, which competes with SK Hynix and Samsung in the global memory market.

Image source: Getty Images.

Micron has been warning about a memory shortage

Micron Executive Vice President and Chief Business Officer Sumit Sadana told investors at KeyBanc's Technology Leadership Forum in August that calendar 2027 would be "even tighter" than 2026.

Sadana also said Micron had no clear indication of when memory supply would finally catch up with demand. Now SK Hynix is telling investors essentially the same thing: The memory shortage issue won’t disappear anytime soon.

And that could give Micron considerable pricing power.

Why HBM demand helps Micron's entire DRAM business

HBM is a specialized form of DRAM that stacks memory chips vertically to deliver the enormous bandwidth required by AI accelerators. Micron manufactures both HBM and conventional DRAM, and there's an interesting relationship between the two products.

Producing HBM requires considerably more manufacturing capacity than producing the same amount of conventional DRAM.

Sadana explained that manufacturing 100 bits of HBM3E consumes as much production capacity as manufacturing approximately 300 bits of standard DRAM. He said that the ratio increases to nearly 4-to-1 with the newer HBM4E technology.

As Micron, SK Hynix, and Samsung pour resources into high-margin HBM products, they're reducing the capacity available for conventional DRAM -- a product essential for computers, smartphones, and data center servers. So, even if Micron doesn't lead the HBM market, it can still benefit from the industry's shift toward manufacturing more HBM.

A less available supply, combined with strong demand, creates opportunities for higher selling prices. And because memory manufacturing has substantial fixed costs, higher prices can deliver an outsize improvement in profit margins.

What does this mean for Micron investors?

SK Hynix's earnings illustrated the demand for memory -- as well as the profits that can be realized. Revenue was 104.62 trillion won ($77.99 billion), up 328% from a year ago. Operating profit was 83.33 trillion won ($62.12 billion), up 632% from last year. The company posted a net profit of 39.78 trillion won ($29.65 billion). SK Hynix stock was up 10% Wednesday morning, while Micron stock rose nearly 5%.

Memory chips have historically been a cyclical business. Strong demand leads to higher prices; manufacturers expand production; and, eventually, excess supply sends prices and profits tumbling.

That risk hasn't disappeared.

Micron is investing in additional manufacturing capacity, including new facilities in Idaho, and its competitors are expanding production as well. If demand slows or new capacity arrives faster than expected, today's favorable pricing conditions could weaken.

SK Hynix's announcement provides another reason to believe Micron's earnings growth could continue beyond the current year. And with the stock up more than 200% in 2026, that's great news for Micron stock investors.

Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.