"Securities Analysts Explain Why Samsung Electronics and SK hynix Stock Plunge Is Excessive and Irrational [Weekend Money]"

Memory Semiconductor Industry: Fundamentals Remain Strong

It has been argued that the recent declines in the stock prices of memory semiconductor companies such as Samsung Electronics and SK hynix are excessive and irrational compared to their fundamentals and the actual semiconductor industry outlook.

On July 25, Hyungkeun Ryu, a researcher at Daishin Securities, stated in his report “Semiconductors, Irrational Stock Price Decline” that “the market is experiencing an overly sharp drop in stock prices” and projected that “the price of memory semiconductors will continue to rise going forward.”

According to the report, in the third quarter of this year, the global general-purpose DRAM price is expected to rise by approximately 20% compared to the previous quarter, while NAND prices are expected to increase by around the mid-to-high teens. A continuation of supply shortages is expected to maximize the effectiveness of suppliers’ customized pricing strategies. Notably, due to reduced production of legacy (older) semiconductors and resulting supply-demand imbalances, some products such as DDR4 and LPDDR4 are reportedly being traded at prices higher than high-bandwidth memory (HBM), which is an abnormal phenomenon.

The report also pointed out that the expansion of long-term agreements (LTAs) with clients, contrary to market concerns, has become a positive factor. LTAs are being signed mainly with core customers, and rather than curbing short-term price increases, they are seen as creating significant medium- to long-term value by extending industry cycles and generating AI business synergies.

Ryu assessed, “In the early stages of LTAs, it is assumed that both upper and lower price limits were set concurrently. As supply shortages intensify, future contracts may only set a price floor, or prices may be fixed for the duration of the contract, thereby strengthening the pricing terms.”

He emphasized, “Contrary to market misconceptions, memory semiconductor prices will be formed more sharply and steadily. During periods of upheaval, there will be a power game centered around the winners who have built stable supply chains.” He reiterated a “Buy” investment opinion on Samsung Electronics and SK hynix, maintaining target prices of 5.6 million won for Samsung Electronics and 3.9 million won for SK hynix, respectively.

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