Semiconductor Stocks Bounce Back Successfully... But the Outlook for the Second Half Remains 'Uncertain'

DRAM Prices Likely to Fall Further Due to Demand Decline
Industry Expects Market Improvement by Mid-Next Year

[Asia Economy Reporter Kwon Jae-hee] Following the strong performance of the semiconductor sector in the U.S. New York stock market on the previous day (25th local time), Korea's stock market is also seeing semiconductor leaders Samsung Electronics and SK Hynix maintain gains for the second consecutive day. This is due to expectations that the semiconductor industry has hit bottom; however, the outlook for the second half of the year is not very optimistic, raising attention as to whether this marks the beginning of an uptrend or just a short-term rally.

According to the Korea Exchange on the 26th, Samsung Electronics, regarded as a semiconductor leader, was trading at 60,600 KRW as of 9:12 AM, up 1.51% from the previous trading day. This is the first time in four days that Samsung Electronics has surpassed 60,000 KRW since the closing price of 60,000 KRW on the 22nd. At the same time, SK Hynix was at 95,900 KRW, up 1.91% from the previous trading day. Both Samsung Electronics and SK Hynix successfully rebounded the day before and have continued their upward trend for two trading days.

The strength of the semiconductor leaders is attributed to the optimism in the New York stock market the previous day, where semiconductor stocks surged on expectations that the semiconductor industry has bottomed out. On the 25th (local time) in the U.S. New York stock market, Nvidia rose 4.01% despite weak Q2 earnings and a downward revision of Q3 guidance. Intel (3.04%), AMD (4.80%), and Micron Technology (4.96%) also rose together. The Philadelphia Semiconductor Index increased by 3.66%.

However, the semiconductor industry outlook remains bleak, with a growing interpretation that this is a short-term rebound. Semiconductor demand is declining due to macroeconomic uncertainties such as interest rate hikes. According to market research firm DRAMeXchange, the spot price of general-purpose DRAM products fell 4.3% in one week. The DXI index, which indicates DRAM price forecasts, has declined for nine consecutive weeks. Despite falling memory prices, front-end companies are not increasing orders, which is adding to the inventory burden of Samsung Electronics and SK Hynix. As of the end of June, the total inventory assets of Samsung Electronics and SK Hynix increased by 26% and 33%, respectively, compared to the end of last year.

There are also forecasts that the decline in semiconductor prices will deepen in the second half of the year despite the seasonal peak. It is expected that DRAM and NAND flash prices in the third quarter will fall 13-18% compared to the second quarter. This is a 5 percentage point increase in the decline from the 8-13% forecast released earlier last month.

The industry expects the semiconductor market to improve only by mid-next year. It is interpreted that stock prices will rise only after inventories are depleted and front-end companies resume orders.

Choi Do-yeon, a researcher at Shinhan Financial Investment, analyzed, "An increase in orders from front-end companies is a signal that the memory semiconductor market is rebounding," adding, "The complete depletion of front-end inventory is expected around the first quarter of next year, and a performance rebound is likely only around mid-2023 when manufacturers' inventories are depleted."

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