Have Semiconductor Stocks Hit Bottom?..."Turning Point Coming in Second Half"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Although semiconductor stocks have continued to show sluggish trends since the beginning of the new year, the securities industry is still sending positive signals. The industry’s view is that the phase of bottoming out for semiconductor stocks has passed, and only upward movement remains ahead. This outlook is particularly due to expectations that the price declines of DRAM and NAND will lessen starting from the second quarter.

According to the securities industry on the 29th, most maintained a buy rating and target prices for Samsung Electronics, the leading semiconductor stock. For SK Hynix, the majority raised target prices while maintaining buy ratings.

KB Securities set a target price of 100,000 KRW for Samsung Electronics, Mirae Asset Securities at 84,000 KRW, eBest Securities at 87,000 KRW, IBK Investment & Securities at 90,000 KRW, and Meritz Securities at 96,000 KRW.

For SK Hynix, Hanwha Investment & Securities proposed a target price of 180,000 KRW, Hana Financial Investment at 170,000 KRW, and Korea Investment & Securities at 160,000 KRW.

Last year, Samsung Electronics achieved sales of 279.6 trillion KRW and operating profit of 31.63 trillion KRW. These figures represent increases of 18.07% and 43.45% respectively compared to the previous year, marking the highest annual sales ever recorded.

SK Hynix also recorded sales of 42.9978 trillion KRW last year, a 34.8% increase from the previous year. Operating profit rose by 147.6% to 12.4103 trillion KRW.

Both companies posted their highest-ever results since their founding, surpassing the semiconductor supercycle peak in 2018 when Samsung Electronics recorded 58.89 trillion KRW and SK Hynix 40.445 trillion KRW.

The top contributor to Samsung Electronics’ strong performance was undoubtedly semiconductors, which generated sales of 94.16 trillion KRW last year alone.

Samsung Electronics reclaimed the title of number one in the semiconductor industry by surpassing Intel. Samsung was the top semiconductor seller in 2018 but lost the position to Intel in 2019 and remained second for two consecutive years. SK Hynix also recorded its highest-ever sales, maintaining its position as the third largest semiconductor company behind Samsung Electronics and Intel.

The securities industry expects the semiconductor market conditions to ease after the first quarter of this year. This is because the downward trend in DRAM and NAND prices is expected to moderate after the first quarter. Furthermore, the decline in DRAM prices is not as severe as initially feared, and most of the price drops are expected to narrow in the second quarter. Notably, DRAM accounts for 70% of SK Hynix’s sales.

Accordingly, solid performance is expected to continue this year. According to financial information provider FnGuide, SK Hynix’s sales for this year are projected at 43.022 trillion KRW, a 34.56% increase compared to the same period last year. Operating profit is expected to rise by 21.5% to 12.3254 trillion KRW.

Samsung Electronics’ sales forecast for this year is 302.7 trillion KRW, with operating profit estimated at 58.9 trillion KRW. Both sales and operating profit are expected to break records once again.

Kim Kyung-min, a researcher at Hana Investment & Securities, evaluated, “One year after SK Hynix’s acquisition of Intel’s NAND flash business, SK Hynix’s stock price driver has expanded from a single variable of DRAM prices to include the additional variable of the NAND business.”

Kim Dong-won, a researcher at KB Securities, forecasted, “With increasing demand from data centers and easing supply shortages of components, memory demand is showing signs of recovery. After the off-season first quarter, performance is expected to continuously improve.”

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