Even If Share Prices Stall, Semiconductor Earnings Shine... How Long Will the Boom Last? [Weekend Money]

Micron Delivers Surprise Earnings and Expands Long-Term Contracts
Daishin Securities Highlights the 'Time Lag' Between Investment and Production Expansion

When business is good, factories are built, and when product supply exceeds demand, prices fall. This is a familiar landscape for semiconductor investors. That is why the recent news of memory chipmakers expanding investments brings both anticipation and unease. Is the current upturn about to lead to an oversupply? Daishin Securities suggested that, this earnings season, investors should be asking, "When does the invested capital actually turn into semiconductors?"

It all starts with the latest results from Micron Technology in the United States. For the fourth quarter of its fiscal year 2026, announced on September 30 (local time), it posted revenue of $54.23 billion, an increase of approximately 379% compared to the same period a year earlier. The company also provided a midpoint revenue forecast of $61.5 billion for the following quarter. On the 1st, Daishin Securities researcher Ryu Hyunggeun noted in a report that both the results and the outlook exceeded market expectations, reaffirming the strong momentum in the memory sector.

Attention now turns to how much further already-improved earnings can grow. If the pace of profitability improvement slows, it may be read as a sign the boom is ending. However, Ryu pointed out that factors such as increased comparison baselines and personnel incentive expenses should also be considered. If there is still room to sell semiconductors at higher prices and in larger volumes, it is difficult to judge the market solely by the rate of profit growth.

First of all, customers are scrambling to secure their share of supply. Micron disclosed it has signed 26 long-term supply contracts, some extending as far as 2031. For manufacturers, this means the ability to estimate future sales volumes ahead of time, while customers can secure the chips they need. The balance is shifting from a business model of waiting for orders to come in, to one where future orders are being booked years in advance. Micron explained that these contracts enhance the predictability of its long-term production plans and performance.

There are also expectations regarding prices. Ryu forecasts that in the fourth quarter of this year, server DRAM prices could jump higher than expected. High Bandwidth Memory (HBM), used in artificial intelligence (AI) servers, is also projected to see price increases in 2027, followed by increased shipment volumes in 2028, further driving growth. The analysis suggests that as AI requires greater memory capacity, competition among customers to secure supply will continue.

So, does the story end once the manufacturers increase factory capacity? This is where timing matters. It takes time to secure land, construct buildings, install equipment, and stabilize production. Just because a capital expenditure announcement is made does not mean semiconductors will flood the market the next quarter. Even with a large investment amount, if construction costs account for a high proportion, the immediate impact on supply expansion is limited.

Micron itself stated that much of its increased investment for the 2027 fiscal year will go toward factory construction. Ryu predicted, "The meaningful production increase resulting from expanded investment will emerge from the second or third quarter of 2028." In other words, there is a time lag — the money goes out first, but products come later, making it difficult to quickly resolve the ongoing supply shortage.

Based on this assessment, Ryu maintained his overweight recommendation on the semiconductor sector. He emphasized, "Excessive caution regarding a slowdown in profit improvement should be avoided," adding, "Surprise upside in earnings due to price and volume factors should be taken into account."

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