KB Securities issued a report on May 28 stating that excessive concerns about the semiconductor sector are expected to be rapidly resolved, recommending Samsung Electronics and SK Hynix stocks as buy opportunities. The brokerage cited eased valuation pressure following recent price declines as the rationale for the timing. Over the recent month, Samsung Electronics and SK Hynix stocks fell 25% and 33% respectively amid doubts about the sustainability of artificial intelligence (AI) investment and concerns over memory supply glut from China. China's CXMT conducted a large-scale initial public offering (IPO) to raise investment capital and signaled aggressive capacity expansion, with its stock price surging 466% above the IPO price on May 27 when it listed on the Chinese mainland exchange.
Samsung and SK Hynix Stocks Record Sharp Declines as CXMT Completes IPO
Over the recent month, Samsung Electronics and SK Hynix stocks declined 25% and 33% respectively. The declines occurred amid doubts about AI investment sustainability and concerns over memory supply glut from China. CXMT conducted a large-scale IPO to raise investment capital and signaled aggressive capacity expansion. On May 27, CXMT's stock price on the Chinese mainland exchange closed 466% above the IPO price.
KB Securities Analyst Assesses Limited Impact from CXMT Capacity Expansion
Kim Dong-won, head of KB Securities Research Division, stated that while CXMT's aggressive capacity expansion attempts are expected to continue for several years, the possibility of this leading to overall DRAM market oversupply is limited. Kim stated that the impact on Samsung Electronics and SK Hynix's mid- to long-term performance will be minimal, with demand significantly exceeding supply and Apple's adoption of Chinese memory remaining limited in possibility. Kim stated that CXMT is projected to expand its DRAM capacity from the current 240K per month to 600K within several years. Kim stated that while the figures appear threatening, CXMT's increased volume is estimated to be mostly used for Chinese companies' AI infrastructure expansion and domestic IT devices. Kim stated that with China's AI development drive, memory demand growth within China is projected to exceed supply growth, limiting the possibility of oversupplied memory affecting markets outside China. Kim stated that Samsung Electronics and SK Hynix are rapidly increasing their AI server-focused proportions centered on long-term supply agreements (LTA) with US big tech companies, so their main customer base will not collide with CXMT's.
Apple Adoption of Chinese Memory Deemed Unlikely by KB Securities
Kim stated that Apple's attempts to adopt CXMT and YMTC memory are limited in likelihood of realization due to geopolitical issues. Kim stated that the US Congress is fiercely opposing such moves, the Chinese government is likely to block overseas export of memory as a strategic asset, and Chinese-made memory and non-Chinese memory are already trading at the same price level within China.
KB Securities Projects Memory Shortage Intensification from 2027
Kim stated that KB Securities maintains a positive view on major memory companies including Samsung Electronics and SK Hynix. Kim stated that from 2027, LTAs between memory companies and US big tech companies will expand in earnest, with a significant portion of memory production volume being allocated to big tech companies first, intensifying the memory shortage experienced by B2C customers in smartphones, PCs, and home appliances. Kim stated that considering this, excessive concerns about the memory industry outlook will be rapidly resolved.
FAQ
What did KB Securities recommend on May 28 regarding Samsung and SK Hynix stocks?
KB Securities issued a report on May 28 stating that the current timing presents a buy opportunity for Samsung Electronics and SK Hynix stocks, citing eased valuation pressure following recent price declines.
How much did Samsung Electronics and SK Hynix stocks decline over the recent month?
Samsung Electronics and SK Hynix stocks declined 25% and 33% respectively over the recent month amid doubts about AI investment sustainability and concerns over memory supply glut from China.
What is KB Securities' projection for memory market conditions from 2027?
KB Securities stated that from 2027, long-term supply agreements between memory companies and US big tech companies will expand, with a significant portion of production allocated to big tech companies first, intensifying memory shortage for B2C customers in smartphones, PCs, and home appliances.
