Return of '60,000 Electronics', Have Semiconductor Stocks Hit Bottom... What is the Outlook for the Second Half?

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[Asia Economy Reporter Kwon Jae-hee] Semiconductor stocks have collectively rebounded amid growing expectations that the semiconductor industry has hit bottom, but some analysts caution that it is still too early to be optimistic. As major semiconductor-related stocks showed strength in the U.S. stock market, South Korea's leading semiconductor stocks, Samsung Electronics and SK Hynix, also posted gains over the past two days. However, the outlook for the second half of the year remains less optimistic, raising questions about whether this marks the beginning of a sustained rise or just a short-term rally.

According to the Korea Exchange on the 27th, Samsung Electronics, considered the leading semiconductor stock, closed at 60,000 KRW, up 0.50% from the previous trading day. During the day, Samsung Electronics briefly rose 2.01% to 60,900 KRW before giving up some of the gains. This is the first time in four days since the closing price of 60,000 KRW on the 22nd that Samsung Electronics has surpassed the 60,000 KRW mark. On the same day, SK Hynix closed at 95,100 KRW, up 1.06%. SK Hynix also recorded an intraday high of 96,800 KRW, up 2.87%.

The strength of the leading semiconductor stocks is attributed to optimism in the New York stock market that the semiconductor industry has bottomed out. On the 25th (local time), despite disappointing Q2 earnings and a downward revision of Q3 guidance, Nvidia rose 4.01% in the U.S. New York stock market. 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 many interpreting the recent gains as a short-term rebound. This is due to declining semiconductor demand amid 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 have not increased orders, exacerbating inventory burdens for 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. DRAM and NAND flash prices in Q3 are expected to fall 13-18% compared to Q2. This represents a 5 percentage point increase in the decline from the 8-13% drop forecasted earlier last month.

Industry insiders expect the semiconductor industry to improve only by mid-next year. It is interpreted that stock prices will rise once 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 industry is rebounding. The complete depletion of front-end inventory is expected around Q1 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.