[Special Stock] Samsung Electronics and SK Hynix Smile as Production Cuts Become Official

by Hwang Yoonju

Published 10 Apr.2023 10:33(KST)

[Image source=Yonhap News]

Samsung Electronics shows an upward trend from the market opening as it officially announces production cuts. SK Hynix's stock price, which is expected to continue posting losses throughout the first half of the year, is also gaining momentum due to the competitor's production cuts.

As of 10:14 a.m. on the 10th, Samsung Electronics is trading at 66,100 KRW, up 1.69% (1,100 KRW) from the previous trading day. SK Hynix is trading at 92,100 KRW, up 3.37% (3,000 KRW).

The reason for the stock price increase is that Samsung Electronics officially announced its 'production cuts.' On the 7th, Samsung Electronics stated that it is "reducing memory production to a meaningful level," effectively acknowledging the production cuts.

Until now, Samsung Electronics had maintained the stance of "no artificial production cuts," aiming to outlast competitors through a chicken game. With Samsung Electronics joining the production cuts, investor sentiment appears to have revived amid expectations that the decline in memory prices will stabilize.

Song Myung-seop, a researcher at Hi Investment & Securities, said, "Samsung Electronics' recent announcement to expand production cuts is expected to accelerate the recovery speed of the memory semiconductor market," adding, "If customers sufficiently reduce inventory after the third quarter and semiconductor demand picks up from the fourth quarter, the semiconductor market could enter a recovery phase."

Han Dong-hee, a researcher at SK Securities, also said, "The primary purpose of the production cuts is likely not 'inventory normalization within the year' but 'stabilization of price declines,'" and added, "Whether there is an expectation of a certain level of inventory normalization will be a key point to stimulate customer demand, so we can expect DRAM fixed prices to rise in the fourth quarter and spot prices to rebound in May to June."

Kim Yang-jae, a researcher at Daol Investment & Securities, stated, "Mentioning unusual production cuts through a preliminary earnings announcement rather than a regular earnings conference is positive for memory supply and demand," and added, "Samsung Electronics' stock price is expected to show a gradual recovery trend depending on future earnings trends."

However, Researcher Kim also assessed that there remains a possibility that the memory market recovery cycle will unfold more gradually than in the past.