SK hynix’s Credit Rating Upgrade Within Reach [fn Market Watch]

[Financial News] SK hynix is within reach of a credit rating upgrade, backed by its competitiveness in the artificial intelligence (AI) memory market and stronger financials. A credit rating agency said the company should be able to maintain sound financial health even if it again suffers a sharp deterioration in performance like those seen during past semiconductor downturns.
According to the credit rating industry on the 29th, Korea Investors Service (KIS) maintained SK hynix’s unsecured bonds and SK Square’s issuer credit rating at “AA+,” respectively, while revising their outlooks from “Stable” to “Positive” the previous day.
The key reason for the outlook revision is the assessment that SK hynix’s financial position has strengthened further compared with past semiconductor upcycles. According to KIS, based on preliminary results as of the end of September this year, SK hynix had net cash of 98.7 trillion won and a total debt-to-EBITDA ratio of 0.1x. The ratio fell from 5.3x at the end of 2023 to 0.7x at the end of 2024 and 0.4x at the end of 2025. Despite large-scale capital expenditures, net cash is expected to grow further, given the operating cash flow projected through 2027.
Kim Jeong-hun, an analyst at KIS, said, “Based on our projections for SK hynix’s performance and financial buffers in 2026–2027, we estimate that it will be able to maintain strong financial buffers even if we assume a sharp decline in EBITDA to levels seen during past downturns.”
The shift toward an HBM-centered business structure is also supporting an improvement in credit quality. Memory manufacturers become involved from the customer’s product development stage, and HBM requires a lengthy qualification process, limiting supplier changes and short-term increases in supply. This means that the expansion of long-term supply contracts could help ease the earnings volatility characteristic of the semiconductor industry.
He forecast that “SK hynix will achieve a higher floor for operating performance during market downturns than in the past, supported by its leading market position in HBM, a business structure centered on high-value-added products, and expanded long-term supply contracts.”
The potential improvement in SK hynix’s credit quality has also extended to SK Square. As of the end of June this year, SK Square had no debt on a standalone basis and a debt-to-equity ratio of just 5.1%.
KIS said the outlook upgrade for SK hynix had increased the likelihood of an upgrade to SK Square’s integrated credit assessment. Given its ample liquidity and financial flexibility based on its stakes in affiliates, KIS also judged that the structural subordination of the holding company’s debt was unlikely to worsen.
However, delays in monetizing AI infrastructure investments, the U.S. government’s demand for expanded local production capacity, and technological advances by Chinese memory makers are cited as factors that could shape credit quality going forward.
 
[email protected] Kim Hyun-jung Reporter