Sold Out, and What That MeansThin moat

SK hynix (SKHY) — moat facet

Being sold out is a condition rather than a moat -- what survives it is the cash accumulated while it lasted.

A memory maker whose output is committed before it is produced is in an unusual position. Volume becomes plannable, the fabs run full, and inventory risk largely disappears.

Operating margin0%202323.4%202448.6%202571.5%Q1 202676.3%Q2 20262023 was -23.6%. Memory margins have gone below zero twice in the past decade.
A condition created by demand outrunning capacity - and capacity is being added.

That is roughly where SK hynix sits, and the second quarter of 2026 shows what it does to economics: revenue of ₩79,318.7 billion, up 256.8% year on year, and operating profit of ₩60,542.6 billion — a margin of about 76%1.

The reason for caution is in the history of that number. Memory margins have been above 50% before and below zero twice in the past decade, most recently in 2023, when the year's cost of sales exceeded the year's revenue2. Nothing about being sold out today says anything about being sold out in eight quarters, because the condition exists only while demand grows faster than capacity — and capacity is currently being added by all three producers at once.

The durable part is not the sold-out condition. It is what gets built with the cash while it lasts: ₩87,958 billion of cash and equivalents against ₩18,587 billion of borrowings3, a position that will still exist when this pricing does not.

Watch utilisation and inventory together. Sold out with rising inventory is not sold out; it is a queue that has stopped moving.

Moat trajectory: Narrowing

Being sold out is a condition created by demand outrunning capacity, and all three producers are now adding capacity at once. The condition has a scheduled end.

The number that tests this moat
Moat Explorer calc
Operating margin
76.3% in Q2 2026

Operating profit of ₩60,542.6 billion on revenue of ₩79,318.7 billion. Memory margins have been above 50% before and below zero twice in the past decade. The direction of this series over the next eight quarters is the entire investment question.

How it's calculated: Operating profit divided by revenue, from the quarterly results disclosure.
Source: SK hynix Q2 2026 preliminary results (SEC Form 6-K) ↗
⚠ Threats to the moat
⚠ THREAT 01
Margins This High Invite Their Own Correction
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.
References
  1. ReportedRevenue of ₩79,318.7bn, up 256.8% year on year, and operating profit of ₩60,542.6bn — about 76%.
    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. ReportedIn 2023 the year's cost of sales exceeded the year's revenue.
    SK hynix Inc., Form 424B4 prospectus — consolidated income statements and management's discussion (SEC, CIK 2120882). FY2025: revenue W 97,147bn, cost of sales W 38,456bn, gross profit W 58,691bn, selling and administrative expenses W 5,019bn, research and development W 6,466bn, profit for the year W 42,948bn. FY2024: revenue W 66,193bn, gross profit W 31,828bn, R&D W 4,436bn, profit W 19,797bn. FY2023: revenue W 32,766bn, cost of sales W 33,299bn, a gross loss of W 533bn, an operating loss of W 7,730bn and a loss for the year of W 9,138bn, following a fall in memory prices from the third quarter of 2022. Q1 2026: revenue W 52,576bn, cost of sales W 10,897bn, gross profit W 41,679bn, R&D W 2,451bn, profit W 40,346bn. — FY2023-FY2025 and Q1 2026 · publ. 2026-07-10 · source ↗
  3. Reported₩87,957.9bn of cash and equivalents against ₩18,586.6bn of borrowings.
    SK hynix Inc., semi-annual business report for the six months to 30 June 2026 (SEC Form 6-K, 18 August 2026) — 'The Company determines supply volumes and prices on a monthly and quarterly basis by mutual agreement with major customers, and there is no order backlog based on long term supply contracts.' Total equity W 262,693,228 million at 30 June 2026 against W 120,666,751 million at 31 December 2025; cash and cash equivalents, short-term financial instruments and short-term investment assets W 87,957,923 million against W 34,942,253 million; total borrowings W 18,586,634 million against W 22,247,905 million; debt-to-equity 32.80%, net borrowing ratio not disclosed because it is negative. For the six months to 30 June 2026, revenues of W 17,608,702 million (13.35%) and W 17,187,421 million (13.03%) were derived from external Customers A and B respectively; for the six months to 30 June 2025, W 10,890,639 million (27.31%) came from Customer A. IDC market share: DRAM 29.9% in 2023, 33.4% in 2024, 34.8% in 2025 and 29.1% in Q1 2026; NAND 19.6%, 21.4%, 20.9% and 18.5%. Gartner's world DRAM market: US$78.7bn in 2022 (-15.4%), US$49.9bn in 2023 (-36.5%), US$91.6bn in 2024 (+82.7%) and US$146.9bn in 2025 (+60.0%). Announced investments include approximately W 15 trillion for M15X in Cheongju, approximately W 19 trillion for the P&T7 advanced packaging plant and W 21,608.1 billion for Yongin, against long-term plans of roughly W 600 trillion for the Yongin cluster and W 100 trillion for Cheongju. The company developed the world's first 321-layer QLC NAND. China's State Administration for Market Regulation cleared the Intel NAND acquisition conditionally, obliging the group to maintain a reasonable pricing policy, increase production and support the entry of third-party competitors into the Chinese eSSD market for five years from December 2021. — six months to 30 June 2026 · publ. 2026-08-18 · source ↗
Sources
Generated September 23, 2026