SK hynix in Discussions with Tesla for Massive Enterprise SSD Order

This report, published on October 25, 2024, was written by TrendForce Corp.

Tesla Reportedly Approaches SK hynix for Massive eSSD Order

Thanks to the explosive demand for AI memory chips, SK hynix’s 3Q24 profit surges to an all-time high. In addition to its dominance on HBM, the Korean memory giant also seems to be securing another major order in enterprise (eSSD), which are large-capacity storage devices used in AI servers. According to the Korea Economic Daily, SK hynix is reportedly in discussions with Tesla for the supply of eSSD worth up to 1 trillion KRW (around $725 million).

The report notes that Tesla recently requested a large-scale, long-term supply of eSSDs from SK hynix. Citing Tesla CEO Elon Musk’s remarks, the report suggests that Tesla is investing approximately $10 billion annually in AI servers and semiconductors to enhance AI technologies needed for autonomous driving and humanoid robots.

According to the Korea Economic Daily, HDDs were commonly used as server storage devices. However, in the AI era, where massive amounts of data need to be processed quickly, eSSDs have rapidly replaced HDDs. Compared to HDDs, which use magnetic disks, eSSDs are smaller in size, consume less power, and offer faster processing speeds.

Citing information provided by Solidigm, the report notes that eSSD can reduce electricity costs to 1/5 of those of HDDs over a 5-year period, while also lowering the total cost by 46%.

It is worth noting that SK hynix, through its subsidiary Solidigm, has developed the industry’s largest 60TB eSSD. The product has reportedly been supplied to several major tech companies, and Tesla has also requested a portion of it, according to the report.

According to a previous report by the Chosun Daily in August, the price for eSSD has surged over 80% due to a sharp rise in AI server expansion orders. As a result, SK hynix and Solidigm are expected to scale up production of large-capacity SSDs using QLC technology designed for enterprise use, the report indicates.

SK hynix posted record-breaking figures in 3Q24, including revenues of 17.5731 trillion won, an operating profit of 7.03 trillion won (with an operating margin of 40%), and a net profit of 5.7534 trillion won (with a net margin of 33%).

In particular, HBM sales showed excellent growth, up more than 70% from 2Q24 and more than 330% from 2Q23.

However, eSSDs are also playing a significant role in boosting SK hynix’s earnings, as 3Q24 eSSD sales accounted for more than 60% of NAND sales and increased by over 430% Y/Y.

According to TrendForce, the 2Q24 already saw a significant increase in demand for enterprise SSDs due to the increased deployment of Nvidia GPU platforms and rising storage needs driven by AI applications, along with a surge in demand from server brands. The demand from North American CSP customers in 3Q24 continued to rise, and server brands show no signs of slowing down their orders, further boosting procurement volumes of enterprise SSD.