Shares of chip machinery makers rise on foundry boom

South Korean manufacturers of chip production equipment have seen their share prices rising sharply, buoyed by a series of new orders received from global semiconductor makers, combined with the aggressive investment plans from Intel Corp. and the largest foundry company TSMC Co.

Shares in Hanmi Semiconductor Co., which produces semiconductor fabrication post-process equipment, have skyrocketed 81% year to date, versus a 9% advance in the broader Kospi market where it is traded. Over the past month, the stock was up 40%, with the semiconductor index on the main bourse touching a peak of 4,037.32 this week.

Over the past month, Hanmi had disclosed nine orders it received from outsourced semiconductor assembly and test (OSAT) companies, including Taiwan's Unimicron Technology Co. and ASE Technology Holding Co. They are suppliers of TSMC. 

The stock with a market capitalization of 1.6 trillion won also moved in tandem with gains in global chip machinery makers. Nasdaq-listed Applied Materials Inc., the world’s biggest equipment maker, has shot up 60% year to date.

Traditionally, Korean chip machinery makers, which are small and medium-sized, had tended to advance around the time when the country's two chip giants -- Samsung Electronics Co. and SK Hynix Inc. -- ramped up production on a large scale. 

Since the beginning of the year, however, they have been driven higher by aggressive investment plans by non-memory chipmakers, or foundry companies despite no prospect of a memory chip capacity build-up. A global chip shortage, in particular depleting supplies of automotive chips, led to their heavy investment plans, with automakers, including Hyundai Motor Co. and Kia, forced to idel some of their productoin lines.

CAPACITY EXPANSION

Intel Corp., the largest US chipmaker, said last month that it will significantly expand its advanced chip manufacturing capacity and jump into the foundry business.

Last week, Taiwan-based TSMC, the world's No.1 foundry company, has announced a $100 billion investment over the next three years to increase production capacity to meet surging demand. Adding to the upbeat outlook, US President Joe Biden earmarked $50 billion to subsidize the semiconductor industry out of his $2 trillion infrastructure investment proposal.

An increase in TSMC's facility spending will prompt OSAT companies to boost investments and then will have a positive ripple effects on Hanmi Semiconductor and other chip machinery suppliers.

"In the past, Hanmi Semiconductor's earnings and share price had moved in the same direction as TSMC," said Shinhan Investment analyst Choi Do-yeon. "Thanks to TSMC's brisk business, Hanmi will continue to see its bottom line impvoing."

Hanmi closed up 3.3% at 32,850 won on Friday, near a 52-week high of 33,000 won. It manufactures apparatus for cutting single or multiple semiconductor packages from a multilayer substrate, and washing, drying, inspecting, sorting and loading chips.

Eugene Technology Co, PSK, Park Systems and Wonik IPS, all of which are listed on the junior Kosdaq market, look set to benefit from the global chipmakers' capacity build-up.
 
"In the past, the key was whether they had long-term domestic clients. Now the focus moved to whether they have global chipmakers as clients," said Hana Financial Investment analyst Kim Kyung-min. "It is because semiconductor investments are taking place around the world in competition to gain dominance."

Eugene Technology has expanded its customer base to Intel and Micron, after it succeeded in developing single wafef processing tool which split wafters into individual wafers in the fabrication process, in cooperation with SK Hynix. The segment had been dominated by Japanese companies previously. The supplier for Intel is now expanding beyond the memory chip equipment market to the non-memory chip machinery segment. It is picked as a beneficiary of Intel's advance into the foundry business. 

In comparison, PSK Inc., a long-term supplier of Samsung Electronincs, has not seen its share price gaining as much as domestic rivals, in the aftermath of Samsung's shutdown of its Austin chip plant in February due to the cold spell. But the Texas plant resumed operations.

Semiconductor tool makers had moved in advance of the memory chipmakers' business cycle, but this year they have been going up on expectations of non-memory chipmakers' capacity expansion, said Shinhan Asset Management fund manager Chung Sung-han.

"Among them, those with capabilities of securing global clients will receive premiums," he added. 

Write to Jae-Yeon Ko at yeon@hankyung.com
Yeonhee Kim edited this article.