"Samsung Electronics and SK hynix Have Only Risen Halfway... Sold Out Through Next Year" [Weekend Money]

"AI Agent Expansion... Memory and Substrate Supply Shortages"
Operating Margin: Samsung Electronics 51%, SK hynix 77%

According to securities industry analysis, despite the widespread adoption of artificial intelligence (AI) agents leading to shortages in memory and packaging substrate supply, the stock prices of key supply chain companies such as Samsung Electronics and SK hynix have not even reached half of their performance-based valuation.

Sansun Electronics and Hynix. Yonhap News Agency

Customer Demand Fulfillment Rate Only 50%

Recently, Kim Dongwon, Head of Research at KB Securities, stated, "Currently, the rate at which customer demand for memory is being fulfilled stands at only 50%. The lead time for packaging substrates—from order to actual supply—has increased fourfold, from the previous 1.5 months (6 weeks) to 6 months (24 weeks)." He made these remarks in a recent analysis.

Memory supply is expected to be even more insufficient next year. Kim explained, "On the supply side, the increase will be limited due to the expansion of HBM (high bandwidth memory) production capacity at new plants and the conversion to advanced process nodes at existing facilities." He added, "The intensity of the memory shortage in the second half of this year is expected to deepen further compared to the first half."

The issue is that it takes at least two years to add new production lines for both memory and substrates. While demand is rising steeply, supply capacity cannot be increased immediately. As a result, the current supply shortage is expected to serve as a key driver not only for short-term price increases but also for the upward revision of corporate earnings and a revaluation of their valuations.

"Samsung Electronics and SK hynix Q2 Results Will Surpass Market Expectations"

The rise in memory prices due to supply shortages is resulting in record-breaking earnings for major domestic semiconductor companies. Notably, this surge in demand is appearing broadly across all memory products—not only for HBM and server DRAM, which are essential for high-performance AI servers, but also for enterprise SSDs and low-power DRAM (LPDDR5X) used in on-device AI applications.

Kim estimated, "Samsung Electronics' operating profit in the second quarter is expected to soar nineteenfold year-on-year to 90 trillion won (operating margin of 51%), while SK hynix's second-quarter operating profit is projected to rise about eightfold to 69 trillion won (operating margin of 77%), which could result in a major earnings surprise."

Given their control over the core supply chain for AI infrastructure, Kim believes that the growth potential for the share prices of leading Korean companies remains significant. He emphasized, "Even now, the stock prices of Samsung Electronics, SK hynix, Samsung Electro-Mechanics, and LG Innotek, which are positioned at the heart of the AI infrastructure supply chain, have not even doubled yet. As we enter a phase where demand is strengthening and supply is becoming even scarcer, there is ample room for further share price appreciation going forward."

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