SK hynix Inc. (A000660) Earnings Call Transcript & Summary

Good morning. Thank you for joining the SK hynix earnings release conference call. We will first have SK hynix present earnings and move on to the Q&A session. [Operator Instructions] The earnings release will be interpreted simultaneously, and the Q&A will be interpreted consecutively. With that, we will begin the SK Hynix 2024 Q4 Earnings Release Conference Call.

Good morning, afternoon and evening. This is Park Seong Hwan, the Head of IR SK hynix. Welcome to the SK Hynix 2024 Q4 Earnings Release Conference Call. Allow me to introduce the executives present here with me today. We are joined by CFO, Kim Woo-Hyun; Head of DRAM Marketing, Kim Kyu Hyun; Head of NAND Marketing, Kim Seok; and Head of HBM Sales and Marketing, Kim Jeong Tae. Let me issue a disclaimer that all outlooks presented by the company are subject to change, depending on the macroeconomic and market circumstances. With that, we will now begin SK Hynix's Earnings Release Conference Call for Fourth Quarter and Full Year of 2024. CFO Kim Woo-Hyun 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. This is CFO, Kim Woo-Hyun. Allow me to first introduce the company's performance for the fourth quarter of 2024. Despite a delay in the recovery of demand for consumer products like PCs and smartphones, the demand for AI memory products in data centers, where investments are rapidly growing, drove overall demand. As a result, we significantly increased the sales of AI memory products including HBM and enterprise SSDs and achieved record high quarterly revenue of KRW 19.77 trillion for the quarter, up 12% from the previous quarter and 75% compared to the same period last year. In DRAM, sales increase of high value-added products such as HBM3 and server DDR5 drove a mid-single-digit percent sequential increase in bit shipments. Despite price decline in legacy products like DDR4 and LPDDR4, blended ASP rose by approximately 10% due to product mix effect. HBM saw another quarter of strong growth, accounting for over 40% of DRAM sales in the Q4 and shipments of HBM3E 12 high products also began as planned during the quarter. In NAND, although sales of enterprise SSDs increased, inventory adjustments by PC and mobile customers led to a reduction in purchasing demand, resulting in a mid-single-digit percent decrease in both shipments and ASP quarter-on-quarter. Sales contribution from high value-added products such as HBM and enterprise SSDs increased significantly, enabling us to maintain relatively stable revenue and profits even during market fluctuations and reflect our improved business structure. As a result, operating income in Q4 increased by KRW 1.05 trillion to KRW 8.08 trillion and operating margin rose by 1 percent point to 41%, again, marking record high operating profit, following the previous quarter. Depreciation and amortization for Q4 increased slightly from last quarter to KRW 317 trillion, with EBITDA reaching KRW 11.25 trillion, and EBITDA margin of 57%. Nonoperating gain net of expenses reached KRW 1.5 trillion. Notable items include foreign currency-related net gain of KRW 0.62 trillion due to strong dollar against won and other nonoperating net gain of KRW 0.87 trillion, which contains gain from the partial sale of stake in System IC Wuxi. As a result, net income before tax was KRW 9.58 trillion, and net profit for the period was KRW 8.01 trillion, with net profit margin of 41%. Now moving on to the annual performance for 2024. 2024 was marked by a significant surge in AI memory demand driven by data centers. Thanks to our leadership in AI memory technology and our profit-oriented business decisions, consolidated revenue for 2024 reached KRW 66.2 trillion, surpassing the record high revenue achieved in 2022. Operating income also exceeded the performance of past super cycle period in 2018, reaching KRW 23.5 trillion. As AI memory demand grows, the memory industry is transitioning from a commodity market driven by volume and price to our customized market focused on high-performance and high-quality products. 2024 results were especially meaningful and that we saw the possibility of memory companies generating stable profits by securing the ability to meet customers' high expectations and support their needs on time. Following our achievement of supplying industries first HBM3E high products in March last year, we were also the first in the industry to support HBM3E 12 high products in the fourth quarter, reinforcing our position as the leading HBM player. Backed by timely supply and sales expansion of HBM3E 8Hi and 12Hi products, annual HBM sales grew more than 4.5x compared to last year, contributing significantly to our record-breaking DRAM performance. Additionally, we rapidly expanded sales of DDR5 and LPDDR5 products, which offer competitive performance and power efficiency, strengthening the profitability of our conventional DRAM products. Despite limited annual shipment growth in NAND, sales of higher-priced enterprise SSDs increased by more than 300% year-on-year, leading to not only a return to profitability for NAND in 2024, but also record annual revenue and operating income. We also secured new demand areas by proactively developing high-density and high-performance storage solutions required for the AI infrastructure. At the end of last year, we launched 61 terabytes and 122 terabyte QLC-based enterprise SSD products, further enhancing our high-density enterprise SSD lineup. As of year-end, our consolidated cash and cash equivalents, including short-term investments amounted to KRW 14.2 trillion, up KRW 5.2 trillion from end of last year's levels. Interest-bearing debt decreased by KRW 6.8 trillion from the previous year to KRW 22.7 trillion. And as a result, our debt-to-equity ratio and net debt-to-equity ratio improved meaningfully, reaching 31% and 12%, respectively. Due to the substantial profit increase in 2024, our annual free cash flow, which is cash flow from operating activities less acquisition of property, plant and equipment amounted to KRW 13.9 trillion. Following our former dividend policy, the Board of Directors confirmed total fourth quarter dividend of KRW 1,305 per share, which is KRW 300 per share as fixed dividend and an additional dividend of KRW 1,005 per share, which is equivalent to 5% of 2024s annual free cash flow per share. In accordance with the amended Articles of Incorporation, the dividend record date for the last fiscal year will be set of February 28, 2025, and the actual dividend amount may be adjusted based on changes in the number of treasury shares until the dividend record date. Next is the company's market outlook and plan. 2025's memory demand outlook is clouded by inventory adjustments from PC and smartphone OEMs as well as strengthened protective trade policies and geopolitical risks. Nevertheless, supply-demand conditions are expected to gradually improve towards the second half of the year as IT device demand improves and inventories are cleared. The demand growth momentum for AI memory products that began in 2023 is expected to continue to be the driving force behind this year's market growth. With the full-fledged beginning of the AI era, memory market demand is moving towards higher performance products from low-priced products. As a result, polarization of memory market demand is expected to become more severe. PC shipments this year are expected to grow by low to mid-single-digit percent driven by corporate PC replacement demand from end of support for Windows 10 as well as effects from AI PC shipments kicking in. AI PC penetration is expected to reach around 30% to 40%, leading to an increase in adoption of not only 16-gigabyte DRAM, which is known to be the minimum required DRAM density for AIPC, but also 24-gigabyte and 32-gigabyte densities. The smartphone market is expected to grow by a low to mid-single-digit percent similar to last year's level. The penetration of AI-enabled smartphones is expected to grow to approximately 30%, driving demand for higher content as well as higher performance mobile memory like LPDDR5X and LPDDR5T. Furthermore, the inclusion of smartphones and tablets to China's consumer subsidies is also expected to drive positive developments on set demand this year. Strong growth of server market demand is expected to continue, driven by big tech companies ongoing competitive investments to secure advanced AI training and inference capabilities. Recently, some big tech firms has even announced annual AI data center investment plans that far exceed market expectations, underscoring the importance of large-scale infrastructure as a key to gaining AI competitiveness. As a result, investments in AI servers are expected to continue expanding for the foreseeable future. Demand growth for HBM and high-density server DRAM is also expected to continue, driven by more launches of generative AI-based services and agents. Combined with rapid rise in demand for computing resources to support the growing importance of inference technologies in AI. Additionally, within the next 2 to 3 years, demand for custom HBM designed to meet the diverse needs of AI customers is also expected to grow considerably. Meanwhile, considering big tech companies demand to replace legacy platforms to improve power and space efficiency, overall server market, including AI, and general purpose server is expected to grow in the high single digits range this year. All in all, this year's DRAM demand is projected to grow by mid- to high-teen percent, while NAND demand is expected to increase by low teen percentage. Now I will discuss the company's plans for this year. Considering the seasonally weak period for IT devices and relatively high memory inventory levels in the supply chain for some end markets, we anticipate a low-teen percent sequential decrease in the first quarter DRAM bit shipments and high-teen percent decrease in NAND shipments. Since the second half of last year, decoupling of demand between AI memory and conventional memory became more pronounced and this led to differentiating product mix and sales strategies among suppliers. Based on our differentiated AI product competitiveness and profit-oriented business decisions, we plan to maintain stable performance even during the period of market corrections. This year, our HBM revenue is expected to grow by over 100% and compared to that of last year, driven by strong customer demand. In particular, demand from ASIC customers is expected to increase meaningfully expanding our customer base. Volume shipment of HBM3E 12Hi products is proceeding smoothly, and we anticipate 12Hi products to account for more than half of the total HBM3E shipments by first half of this year, as previously planned. In November last year, we developed the industry's first HBM3E 16Hi product based on advanced MR-MUF process, further demonstrating our leadership in HBM technology. This year, we plan to complete development of HBM4 12Hi product and prepare for mass production as the product will be mainstream from 2026. By supporting the product on time of customers' needs, we plan to maintain our leadership in the HBM market. Additionally, by migrating to advanced nodes, we are preparing to increase production of DDR5 and LPDDR5 products, that we have solid technological competitiveness and are showing better demand. This will allow us to produce more competitive products compared to latecomers. To meet the upcoming demand for on-device AI, we are also preparing various product lines such as LPCAMM2 and ZUFS, which offer improved data processing speed and power efficiency and plan to supply them in time for increasing customer demand this year. For NAND, considering delayed demand recovery in a wide range of applications other than enterprise SSDs, we will continue our profit-focused approach and sales strategy that is aligned with demand, as we have done last year. Meanwhile, we are proactively preparing manufacturing infrastructure to support next-generation technologies and products in a timely manner and continue leadership in those markets. M15X fab is currently under construction in Cheong-ju and is scheduled to open in the fourth quarter of this year. The first fab in the Yong-in is also scheduled to begin construction this year with a target fab opening in the second quarter of 2027. The construction of these new fabs will lead to a marked increase in infrastructure-related investment this year, although overall an investment increment will be limited. However, we will continue to follow the principle of investing only in products that ensure profitability and make flexible investment decisions based on changing market conditions. In addition, we have completed an advanced packaging investment agreement with the State of Indiana in the U.S. and signed a final funding agreement with the U.S. government under the CHIPS Act for approximately KRW 660 billion at the end of last year. We will secure advanced packaging facilities to ensure our ability to produce a variety of customized memory products on time and to meet the increasingly complex demands of our customers. Finally, let me introduce our new shareholder return policy. In November 2024, we announced a new shareholder return policy to be implemented over the next 3 years. We have determined that in order to further enhance our corporate value, it is essential to strengthen our position as a leading AI memory company through continuous investment while also swiftly improving financial stability that was weakened during the recent downturn. To this end, we have set securing positive net cash and appropriate cash levels as our financial goals, which will enable stable business operations and investments to maintain competitiveness, regardless of future market fluctuations. These objectives have been incorporated into our current shareholder return policy. First, the annual fixed dividend per share will be increased by 25% from KRW 1,200 to KRW 1,500, which increases the total cash dividend paid to shareholders to KRW 1 trillion per year. This ensures that the total cash dividends paid during this policy period will be at least the same level as that paid under the previous policy. However, going forward, only the fixed annual dividend amount will be paid and the 5% of annual FCF that was distributed under the previous policy will be used to strengthen our financial soundness. At the same time, we will maintain to use 50% of accumulated 3-year FCF as a resource to provide total shareholder returns. Any additional returns beyond the annual dividend will be made within the scope of maintaining financial goals after the policy term ends. Through this new shareholder return policy, we expect to enhance our financial soundness, allowing us to steadily improve our corporate value even amid market fluctuations. And as our performance continues to improve, we expect to be able to offer additional returns to shareholders. Moving forward, we will strive to consistently improve our performance based on our leadership in our AI space and ultimately increase the scale of returns to shareholders over the long term. Thank you. With that, we are now ready to take your questions.

[Operator Instructions] The first question will be provided by Kim Sun Woo from Meritz Securities.

[Interpreted] So the question is commodity memory prices have started to decline from Q4 due to weak demand and increased supply from Chinese manufacturers, and this trend seems likely to continue into the first half of the year. So how do you view the memory market for this year? And do you see it as a short-term adjustment? Or do you expect the correction similar to 2023?

[Interpreted] Thank you very much for the question. I will first answer the part related with the DRAM. As you mentioned, commodity memory prices began to decline from Q4 last year due to a continued sluggish demand from major applications. The price decline has been particularly evident for DDR4 and LPDDR4 product, which are impacted by high inventory levels and increased supply from Chinese manufacturers. And we anticipate that commodity memory market will continue to show weak pricing trend in the short term because of the influence from the slow seasonal demand in the first half and inventory adjustment by customers. However, starting in the second half, we expect increased demand for high-end, high-density memory in AI PCs and smartphones. And this demand, coupled with supply expansion of DDR5 from memory manufacturers is unlikely to cause significant imbalance between supply and demand. So therefore, we predict that there will be a continuous growth in HBM AI memory market, whereas conventional DRAM market will go through a gradual smooth correction. And most suppliers are focusing investment in HBM where demand visibility is high and profitability is secured. This cautious investment focusing on HBM and prioritizing AI memory production over commodity products with limited capacity, so that the cycle this time will be different from past downturns. Let me also touch upon the NAND. NAND has been more significantly affected by demand slowdowns in traditional applications and some suppliers have already announced production cuts. We also plan to continue our flexible investment and production strategies that we have maintained since 2023 to focus on profitability. So in this slide, we anticipate that NAND will also experience a milder correction compared to previous downturns. However, for the market situations to improve both supply adjustments and a recovery in end demand are critical and the pace of NAND market recovery will ultimately depend on how quickly demand for general purpose applications rebound.

The following question will be presented by Nicolas Gaudois from UBS.

Regarding HBM, could you give us a bit more details on your preparation stages for HBM4? In particular, when would production actually start for HBM4 12Hi? And when do you expect to ship in volumes to customers initially with the ramp in 2026? Do you have also a broad time line from when 16Hi HBM4 would come? And lastly, for the logic-based die, would you -- can you confirm you would use TSMC from the start for HBM4 12Hi?

[Interpreted] So thank you for the question. As we mentioned earlier, our HBM4 product is being developed based on the proven 1b nanometer technology, which ensures both technical stability and mass producibility. We aim to complete development and be ready for ramp-up by the second half of this year. HBM4 supply will initially begin with 12Hi products and 16Hi products will follow based on customer demand and shipments are expected in the second half of next year. And regarding 16Hi packaging technology, we anticipate that we can leverage our experience with the advanced MR-MUF process, which was first applied in HBM3E to mass-produce HBM4 16Hi products. And for the first time in HBM4, we plan to use logic foundries for the base die to enhance performance and power efficiency. To achieve this, we are collaborating closely with TSMC as one team.

The following question will be presented by Jay Kwon from JPMorgan.

[Interpreted] You mentioned that the CapEx investment will increase this year compared to last year. Considering the current demand environment, is there any possibility of reducing the planned CapEx? And what will be the approximate breakdown for infrastructure investment versus the fab investment this year? And can you also compare the investment this year to last year?

[Interpreted] So thank you for the question. Let me answer your question. This year, we plan to have a slight increase in investment compared to last year, and this will be mainly driven by HBM investment that we agreed upon with customers and the construction of M15X and Yong-in fab that lay foundation for future growth. So as we mentioned before, when making investment, we put priority on products with proven profitability and we are guided by principles of responding to market changes with agility and flexibility. And this year, our primary focus will be on investment essential to meet market demand. And at the same time, we'll work hard to lay groundwork for future growth, including fab construction to ensure that our leading technologies will turn into business at the right time. So the majority of investment this year will be concentrated on HBM and infrastructure, and infrastructure investment is expected to increase significantly compared to last year. So we'll continue to optimize resource allocation for each product to expand FCF and maximize investment efficiency by prioritizing technology transitions and also seize growth opportunities through agile market responses.

The following question will be presented by Kim Dongwon from KB Securities.

[Interpreted] So how much DDR4 and LPDDR4 proportion be reduced compared to last year?

[Interpreted] So this year, in the DRAM market, high-performance, high-end products like HBM and DDR5 are expected to see tight supply because of increasing demand. Whereas legacy products, such as DDR4 and LPDDR4, they are likely to experience an accelerated decline in demand, which will deepen the decoupling trend between product types. So our competitiveness in HBM and DDR5 underpinned our leading position in the DRAM market and in order to focus on leading the demand for these products, we'll continue to scale down the production of legacy products like DDR4 and LPDDR4 and streamline and clear inventory. As a result, the share of legacy products, such as DDR4 and LPDDR4 in our revenue is projected to drop significantly from around 20% last year to single digit this year.

The following question will be presented by SK Kim from Daiwa Securities.

[Interpreted] First of all, congratulations on your great and excellent performance. I do have a question regarding HBM. As AI growth trends shift from the training phase to the inferencing phase, there are concerns that demand for high-performance HBM may also slow down. What's your view on this?

[Interpreted] Thank you for the question. I don't really think so. In the only AI market, GPUs equipped with high-performance HBM were essential for training AI and it was expected that the inferencing phase may require relatively low-end HBM, but that was only the initial expectation. With the recent development of inference AI, the market is now shifting towards a more advanced inference, and this only highlights the growing importance of higher memory capacity and bandwidth. So to ultimately develop artificial general intelligence or AGI that resemble human intelligence, substantial computational power is required even during the inferencing phase. And therefore, rather than slowing down demand, we expect that the expansion of the AI market toward inference will become a critical driver for HBM growth. Moreover, we anticipate that major tech companies' ongoing competitive investment will continue to secure AI leadership and also to achieve precise training and inference results. AI investment plans are now being announced not only by corporations but also at the national government level, indicating that AI demand will continue to surpass our growth expectation. In addition, the technologies presented at CES this year, such as physical AI and various AI agents, they are expected to serve as long-term growth driver for HBM demand will continue push forward the development of both processors and software.

The following question will be presented by Ryu Young Ho from NH Investment & Securities.

[Interpreted] So I would like to ask a question in relation with servers. Server DDR5 demand last year was very strong. And are there any signs of slowdown in customer demand recently? And what's your assessment of the hyperscale customers DRAM inventory level?

[Interpreted] So thank you for the question. Hyperscale customers have continuously expanded investment to secure high-performance computing infrastructure. And accordingly, AI servers has also continuously exhibited strong demand growth and also investment in conventional servers have also been made alongside in tandem, which ensure robust server DRAM demand this year following last year. Also, when establishing AI data center, there is a growing emphasis on efficient space utilization and high energy efficiency. Taking into consideration the replacement cycle of servers where massive investment was made in 2017 and '18, we expect that this will -- this year, we will see a strong surge in replacement demand. In addition, with new CPUs that support DDR5 ramping up this year and customers holding low DDR5 inventory levels, server DRAM demand, particularly for DDR5, is expected to remain very strong. Even if DDR5 prices undergo temporary adjustments, server customers will still have opportunities to build inventory at favorable price. And therefore, we don't really have a serious concern about potential slowdown in DDR5 demand. So by proactively addressing the demand for high-performance, high-density server DRAM models this year, we will continue to secure our leadership in the server market.

The following question will be presented by Peter Lee from Citigroup.

[Interpreted] So once again, big congratulations for your excellent performance despite the deepening decoupling trend in the memory market demand. There is a perception that your 1c-nanometer process is superior to competitors. What is the SK Hynix' status of 1c-nanometer development? And what are your plans for expanding investments?

[Interpreted] So based on our excellent 1b-nanometer technology, we completed the development of 1c-nanometer products in the second half of last year, and we also built potential for mass production. Our 1c-nanometer-based DDR5 product supports a maximum operating speed of 9.2 Gbps, approximately 28% faster than the previous generation with over a 9% improvement in power efficiency. As we transition to the AI era, which demands rapid data processing and low power consumption, these products are designed to be optimized to meet future server demand. In addition, 1c-nanometer product exceeded the target yield for the initial ramp-up phase already in the development stage, indicating that the expanded production and ramp-up could lead to significant cost savings. So while we will begin applying 1c-nanometer to ramp up conventional DRAM products starting from the second half, a significant portion of investment this year will focus on HBM and infrastructure, where we already secured customer demand. And therefore, we will keep a close eye on future demand and supply dynamics in order to make the right investment decisions for ramp-up. And also, as for the 1c-nanometer process that shows the excellent performance and stable initial yields, so we are going to apply that to the HBM4E in the future in order to ensure the timely development and supply of the next-generation HBM products to secure and maintain market leadership.

The following question will be presented by Han Dong Hee from SK Securities.

[Interpreted] So I have one question regarding NAND. If the current downward trend in NAND price continue, there is a possibility that the industry might return to losses in the second half of the year, do you have any additional plan for NAND production cut? If so, to what extent and for how long?

[Interpreted] So during the previous downturn, we cut production, mainly in legacy technologies while increasing wafer production in 2024 to meet rising eSSD demand. However, for products other than enterprise SSD, we have maintained limited production considering the delayed recovery of demand in general applications. Moving forward, until we see clear signs of demand improvement for NAND, we'll continue to maintain current approach and flexibly adjust production in line with market conditions, and we'll focus on normalizing inventory levels.

The following question will be presented by Kim Young-gun from Mirae Asset Securities.

[Interpreted] When do you expect to finalize HBM supply volumes for 2026? And do you think the strong growth trend of HBM be sustained in the future?

[Interpreted] So we at SK hynix have already initiated discussions with some customers regarding HBM supply volumes for 2026. So we expect that we'll be able to gain some visibility for most of the next year's volumes by the first half of this year. And considering the high investment costs and long TAT associated with the HBM business, we aim to enhance business stability and visibility by securing a long-term contract through a proactive negotiation with customers. And as we mentioned earlier, the AI market holds significant growth potential, far exceeding our expectations, and they're mainly driven by advancements in learning and inference technologies as well as the integration of AI services across different industries. The fourth industry revolution previously represented by big data, artificial intelligence, robotics and autonomous vehicle is now transforming industries with strong and visible AI innovation. This accelerating industrial transformation is expected to continuously generate high computing demand. And therefore, we have no doubt about the sustained long-term growth of HBM demand.

The following question will be presented by Choi Bo Young from Kyobo Securities.

[Interpreted] So let me ask you a simple question. In this year's performance, could you please elaborate on the significant nonoperating profit recorded and the factors that influenced it?

[Interpreted] So our subsidiary, SK Hynix System held a 100% stake in System IC Wuxi, and they completed the process of converting the System IC Wuxi into a joint venture last November. And during this process, some of our stakes were divested, resulting in approximately KRW 1.3 trillion in gains, and it was recognized as nonoperating income in Q4. In addition, in December, Kioxia went public, and our investment assets in Kioxia were reevaluated to reflect the year-end closing price, and this resulted in the evaluation loss of approximately KRW 100 billion -- sorry, KRW 200 billion. In addition, due to rising exchange rate, we were credited a net foreign exchange gain of approximately KRW 600 billion. And overall, all in all, the total nonoperating profit for Q4 amounted to about KRW 1.5 trillion.

The following question will be presented by Lee Giuni from Goldman Sachs.

[Interpreted] Again, congratulations for your good performance, and thank you for giving me this opportunity. There are increasing debates on the Chinese DRAM companies nowadays. So how does the SK hynix assess the technological capabilities of these Chinese DRAM companies? Do you think that they can enter the DDR5 and HBM market?

[Interpreted] So since the second half of last year, Chinese DRAM manufacturers have expanded the supply of DDR4 and LPDDR4 products and coupled with slow demand, the prices of these legacy products have continuously dropped. And recently some reports even suggest DDR5 development and sales by Chinese manufacturers raising concerns about potential market impact. However, the technologies applied by these latecomer companies are significantly behind the advanced nodes used by major leading suppliers. And therefore, this will lead to a clear wide gap in quality and performance of DDR5 products. Moreover, with ongoing restrictions against Chinese companies and China, Chinese manufacturer is expected to face heightened uncertainties in developing advanced nodes and technologies. So by focusing on advanced node development and ensuring timely readiness for high-performance products and developing various AI memory products, including HBM we'll continue to maintain a strong lead over competitors in various aspects, including product portfolio, performance, quality and customer services.

The last question will be presented by Simon Woo from Bank of America.

[Interpreted] My question is about your prediction for the production growth rate for DRAM, excluding HBM because there is an ongoing CapEx investments centering around HBM. So I want to know about your plans for general conventional DRAM.

[Interpreted] So over the past 2 years, we have utilized the advanced nodes with priority in order to reduce conventional DRAM production in response to market downturn and also to mass produce profitable HBM products. And therefore, we have seen a very limited increase in the production of conventional DRAM, except HBM. Starting in the second half of last year, we have scaled down the legacy DRAM production due to worsening supply and demand conditions. But at the same time, we are expanding the adoption of 1a-nanometer processes to increase supply for DDR5 and LPDDR5, which show strong demand. And therefore -- and the wafer production for conventional DRAM is expected to grow slightly this year. So considering the production increase due to migration to advanced process and wafer production increase for conventional DRAM product, we expect that general DRAM production this year is expected to grow at a rate aligned with market demand. So this year, with solid and strong HBM demand in AI market, we'll maximize HBM production. And for conventional DRAM products, we will have a product mix prioritizing profitability within limited capacity. And by pursuing transitioning to advanced nodes, we'll ensure timing supply for our customers and maintain healthy and sound inventory levels for legacy products.

[Interpreted] So this will conclude the earnings call conference call. Thank you for your attendance. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]