'This Year Semiconductor Stocks: Non-Memory > Memory... Next Year Memory > Non-Memory'

[Asia Economy Reporter Lee Seon-ae] Shinhan Financial Investment forecasted that next year, the stock price growth rate of memory semiconductors will surpass that of non-memory semiconductors. This is due to the normalization of IT supply chain disruptions and performance growth exceeding price increases.

On the 12th, Namgung Hyun, a researcher at Shinhan Financial Investment, stated, "We continue to recommend increasing the proportion of memory semiconductors toward a turnaround in 2022."

This year, the stock prices of non-memory and memory semiconductors showed a stark contrast. While the Philadelphia Semiconductor Index rose by 41.8%, Samsung Electronics and SK Hynix recorded stock price changes of -4.4% and +1.3%, respectively. Most of the stocks comprising the Philadelphia Semiconductor Index are non-memory, whereas Samsung Electronics and SK Hynix's main businesses are memory. Since the demand front for both non-memory and memory is the same?smartphones, servers, PCs?their earnings and stock price trends generally move together. The reason memory stocks underperformed this year was due to IT supply chain disruptions.

Until the third quarter, memory semiconductors could not fully supply the quantities demanded by customers. However, because supply shortages were even more severe for non-memory and other components due to IT supply chain disruptions, a short-term adjustment occurred in memory. Nevertheless, in 2022, it is expected that the easing of IT supply chain disruptions will return the environment to normal.

Generally, in periods of increasing IT demand, memory recovers later than non-memory. This is because memory has a more commodity-like nature compared to non-memory, requiring more time to deplete inventory. However, after front-end inventory depletion, performance growth rates become overwhelming due to price increases caused by supply shortages. As a result, in the IT demand growth cycle, non-memory stocks are strong in the early phase, while memory stocks are strong in the later phase. In 2022, with continued server demand growth, a reversal in memory semiconductor prices is expected.

Researcher Nam said, "We expect an increase in server orders in the first quarter of next year and a rebound in memory prices in the second quarter because IT supply chain disruptions will normalize, new server platforms from Intel/AMD will be launched, and the U.S. Department of Defense JWCC project will be concentrated."

Currently, it is still a valuation call phase, and the momentum call phase has not even started. Confidence in the bottoming of the industry has been established, but certainty about the upward turn has not yet formed. There remains significant potential for semiconductor stock price increases.

Nam emphasized, "SK Hynix's price-to-book ratio (PBR) had fallen to the lowest bottom, and Samsung Electronics' stock price has given back all expectations for non-memory. Due to conservative CapEx responses by DRAM companies and the penetration effect of DDR5, the speed of DRAM industry improvement can greatly exceed market expectations. Therefore, we recommend increasing the proportion of memory semiconductors toward a turnaround in 2022."

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