Korean chipmakers tumble, wipe out $13 billion in market capitalization

Shares of South Korea’s two largest chipmakers – Samsung Electronics Co. and SK Hynix Inc. – are slumping on a bearish industry outlook that chip demand could peak in the fourth quarter.

Samsung Electronics, the largest stock on the Kospi market, is down 1.2% at 77,600 won in early Thursday trade, extending its losing streak to the third straight session.

SK Hynix, the second-largest stock on the main bourse, is trading down 4.3% at 101,000 won, falling for a sixth day. On Wednesday, the stock finished 6.2% lower, the biggest percentage fall since March 19, 2020.

The two stocks, including Samsung’s preferred shares, wiped out a combined 15 trillion won ($13 billion) in market capitalization on Wednesday alone.

The share price slide was led by foreign investors who sold 1.6 trillion won worth of shares, including Samsung and SK Hynix, on the main exchange Wednesday.

The significant drops followed a recent gloomy forecast by Taiwan-based market researcher TrendForce that the current uptrend in memory chip prices could end in the fourth quarter of this year on weakening demand.

The fourth-quarter contract price of DRAM chips for PCs could fall as much as 5% compared to the third quarter, as chip demand for laptops is slowing with people starting to return to work and schools, according to TrendForce.

According to market data provider DRAMeXchange, the July contract price of DDR4 8Gb for PCs, one of the most common DRAM products, had risen to $4.1 from $2.85 at the end of 2020.

“The spot prices, a leading indicator for the chip industry, are falling at a fast pace. The prices may not rebound until early next year,” said HI Investment & Securities analyst Song Myung-seob.

OUTLOOK SPLIT

The spot prices of DRAM chips recently fell below their contract prices, signaling that the current chip price downturn will continue for some time.

“Global PC demand is shrinking and DRAM demand from server companies aren’t as good as before,” he said.

The bearish industry outlook has battered shares of most memory chipmakers around the globe, including Micron Technology Inc., but the two Korean chipmakers bore the brunt as Samsung and SK Hynix are the world’s two largest memory chipmakers.

Analysts said chipmakers’ share prices could be depressed further if they expand facilities as promised before.

Industry leaders such as Samsung and SK Hynix are running their plants at full capacity, as demand increased recently, creating a dire shortage situation across industries, particularly in the auto, smartphone and electronic device sectors.

Some semiconductor analysts, however, said the stock market is overreacting to concerns about a chip demand fall.

“The outlook is basically all about the balance in supply and demand. I don’t think the chipmakers are foolish enough to enter a cutthroat race to supply more chips than are necessary,” said Lee Kyung-soo, head of research at Meritz Securities Co.

“We hold a positive view on the chip industry until the second quarter of next year. You need to buy shares of chipmakers on the dip.”

Write to Jae-Won Park at wonderful@hankyung.com
In-Soo Nam edited this article.