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Semiconductor Supply Chain Heats Up with CXMT IPO
"MK Electron and Duksan Hi-Metal Accelerate Sales in China"

There are expectations that domestic semiconductor post-processing materials companies could benefit from large-scale facility investments by Chinese semiconductor firms. As demand for artificial intelligence (AI) hardware surges and China pushes forward with its semiconductor ambitions, analysts predict an even faster improvement in the performance of these materials companies.

"Domestic Post-Processing Materials Companies Already Achieving Growth Linked to China"

On July 28, Kim Jongbae, a researcher at Hyundai Motor Securities, stated, "It is important to pay attention to domestic semiconductor post-processing materials companies that can enjoy dual benefits from the growth in global AI hardware demand and momentum from China, given the currently limited supply situation."

Kim continued, "Amid memory supply shortages, Changxin Memory Technologies (CXMT) in China has successfully completed its initial public offering (IPO) and secured funding," adding, "With production capacity set to expand rapidly, domestic companies within the related value chain are expected to benefit."

Among domestic post-processing materials companies, solder balls and bonding wires are cited as items with high exposure to the Chinese market. In the global market, these materials primarily compete with Japanese companies. Within China, there is a strong preference for Korean companies, allowing them to maintain high market shares. The technology gap with local Chinese firms also remains significant.

The main customers for domestic post-processing materials suppliers are Chinese outsourced semiconductor assembly and test (OSAT) companies. Kim noted, "Chinese OSAT companies are achieving rapid performance growth alongside China's push for semiconductor independence, rising to join the global top tier," and added, "In line with the growth of Chinese semiconductor firms, the China-related performance of domestic materials companies is also expanding quickly."

"Valuation Becomes Attractive Due to Share Price Corrections"

As of the first quarter of this year, domestic post-processing materials companies posted explosive growth in sales to China. MK Electron saw its first-quarter sales in China rise by 155% year-on-year. Excluding Korea Land & Housing Corporation, the proportion of operating profit from Chinese subsidiaries accounted for 46% of total consolidated first-quarter operating profit. Electroplating wire also maintained a high market share in China, establishing a powerful driver of growth.

Duksan Hi-Metal likewise boosted its proportion of China sales to around 15% on a separate basis in the first quarter. Sales to China increased by 120% year-on-year. Kim explained, "The approximately 30% increase in production capacity was implemented to respond to growing demand from China," and predicted, "Since Duksan Hi-Metal is estimated to hold about an 80% share of the solder ball market within CXMT, the rapid growth of CXMT will drive a steep upward trajectory for Duksan Hi-Metal's solder ball sales as well."

Kim also noted, "While domestic post-processing materials companies have demonstrated rapid performance improvement, recent share price corrections have brought them into a very attractive valuation range." He added, "Their fundamentals are actually improving further, and they are positioning themselves to meet medium- to long-term demand."

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