Samsung Electronics and SK Hynix, Will They Drop Again Today?

Fear of Semiconductor Market Turnover Outlook
Attention on Samsung Electronics and SK Hynix Stock Prices

[Asia Economy Reporter Hwang Junho] Samsung Electronics and SK Hynix, ranked first and second in KOSPI market capitalization, respectively, experienced significant declines following net selling by foreign investors the previous day, and domestic securities firms have issued reports lowering their target prices. Attention is focused on whether the weakness in semiconductor stocks will continue in the market today.

On the 12th, Hana Financial Investment lowered SK Hynix's target price from 165,000 KRW to 130,000 KRW, assuming that DRAM prices would fall by 15% over six months starting from the fourth quarter of 2021. This downward adjustment is based on the premise that the recent decline in PC DRAM spot prices triggered a "Wag the Dog" phenomenon causing server DRAM prices to fall, which may limit price rebounds.

Kim Kyung-min, a researcher at Hana Financial Investment, explained, "When PC DRAM spot prices fall, buyers tend to wait for prices to drop further. They do not necessarily need to replenish inventory today for products that might be cheaper tomorrow," adding, "We assumed that this inertial purchasing pattern would continue into next year."

According to the Korea Exchange, on the 11th, foreign investors sold Samsung Electronics shares worth approximately 1.0492 trillion KRW, causing the stock price to drop by 2.12%. SK Hynix also saw net selling of 673.7 billion KRW, resulting in a decline of 6.22%, a larger drop than during the COVID-19 crisis. Given that foreign investors' net selling on the KOSPI that day was about 1.6509 trillion KRW, it can be inferred that semiconductor stocks were heavily sold off. Consequently, Samsung Electronics' market capitalization decreased by 10.1486 trillion KRW in a single day. Including Samsung Electronics preferred shares (905.1 billion KRW), about 11 trillion KRW evaporated. SK Hynix's market cap also shrank by 5.096 trillion KRW.

The market was gripped by fear amid forecasts of a sharp reversal in the semiconductor market. Market research firm TrendForce projected that the fixed transaction price for PC DRAM in Q4 this year would decline by approximately 0-5% compared to the previous quarter. The fixed transaction price refers to the wholesale price at which semiconductor manufacturers trade with demand companies.

Hong Kong-based securities firm CLSA downgraded Samsung Electronics' investment rating from "Buy" to "Underperform" and lowered the target price from 110,000 KRW to 86,000 KRW in a report released on the 9th (local time). SK Hynix's rating was also adjusted to "Underperform," with the target price cut from 172,000 KRW to 123,000 KRW. This adjustment was based on the judgment that PC and smartphone OEMs have begun to ease memory semiconductor inventory accumulation, and data centers' inventory buildup is expected to normalize after Q4 this year, leading to an unfavorable supply-demand structure.

Researcher Kim said, "As much as earnings estimates, the investment rating is a concern," adding, "Interest in the memory semiconductor sector has declined, making a meaningful rebound to pre-peak levels by year-end difficult. However, since stock prices have sharply fallen in a short period reflecting fear, the possibility of further decline is limited, so we maintain a 'Buy' rating."

Lee Jae-yoon, a researcher at Yuanta Securities, also noted, "If production disruptions in front-end industries continue due to non-memory semiconductor supply shortages, it could lead to a temporary demand gap for memory semiconductors," adding, "For this reason, memory customers' purchasing behavior has become somewhat cautious, and uncertainty about semiconductor price forecasts for Q4 this year is increasing." However, he analyzed, "Since major memory manufacturers (Samsung Electronics, SK Hynix, etc.) hold less than one week of inventory and production bottlenecks are intensifying, the possibility of a sharp price drop or prolonged down cycle is low."

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