Uncertain SK Hynix... Price Increase VS Corona Fear

Price Increase Expected Due to Supply Chain Instability
Productivity and Demand Slowdown Anticipated Amid US COVID-19 Spread Fears

[Image source=AP Yonhap News]

[Asia Economy Reporter Minwoo Lee] Although semiconductor prices are rising due to supply chain instability in the industry, the expansion of fear over the novel coronavirus infection (COVID-19) is also causing demand to slow down, increasing uncertainty over SK Hynix's performance.

On the 29th, Eugene Investment & Securities lowered SK Hynix's annual performance forecast for this year to KRW 31.905 trillion in sales and KRW 6.046 trillion in operating profit. This represents a decrease of about 3% in sales and 12% in operating profit compared to previous estimates. It is analyzed that while supply instability is increasing due to production halts caused by the spread of COVID-19 infections, demand slowdown is expected due to the spread of COVID-19 in the United States, creating a chaotic situation.

First, it was predicted that prices would rise as both demand and supply become unstable simultaneously. Researcher Seungwoo Lee of Eugene Investment & Securities explained, "From experience, uncertainty in the supply chain has led to an increase in chip prices," adding, "Fixed transaction prices centered on servers are being negotiated to continue rising, and spot prices, which had been falling since mid-month, are rising again as the increase in COVID-19 cases in China slows."

However, concerns grew as the possibility of COVID-19 spreading in the United States, the most worrisome variable, increased. Researcher Lee stated, "Although product price increases are expected, considering the potential for productivity decline, cost increases, and intensified demand slowdown due to the spread of COVID-19, there are factors leading to a downward revision of performance forecasts," and evaluated, "The expansion of fear inevitably leads to a decline in valuation."

Accordingly, Eugene Investment & Securities lowered SK Hynix's target stock price by 8%, from KRW 125,000 to KRW 115,000. The closing price the previous day was KRW 87,900. However, the investment opinion was maintained as 'Buy.' Researcher Lee explained, "This is because the expectation that performance will continue to rise in the second half of the year is still valid." Financial

This content was produced with the assistance of AI translation services.