Samsung Elec, SK Hynix shares jump alongside US peers

Samsung Electronics Co. and SK Hynix sharply rose on Aug. 24 after suffering a continuous sell-off. The Philadelphia Semiconductor Index gained for a third consecutive session, easing investors’ concerns over South Korean chipmakers. Foreign investors, who had been dumping Seoul stocks, turned to net buyers for the first time in 11 sessions.

Shares in Samsung and SK Hynix are expected to stabilize in the near term as their losses were excessive, although worries remain that chip demand could peak in the fourth quarter, analysts said.

The Philadelphia Semiconductor Index on Aug. 23 rose 2.6%, extending its gains to 4.2% in the latest three sessions and recouping losses in the last two weeks. US semiconductor makers’ stocks jumped after China’s antitrust authority approved Analog Devices’ takeover of Maxim Integrated Products. The $20.5 billion merger needs to get the nod from regulators of eight countries including the United States, China and South Korea. China, which is at odds with the US, has been stymied during the approval process.

The Chinese permission raised Analog Devices by 1.8% and Maxim Integrated Products by 4.9%. Advanced Micro Devices Inc (AMD), which is set to acquire Xilinx Inc., advanced 3.9%. Xilinx gained 6.4%. Nvidia, which is planning an acquisition of ARM, also rose 5.5%.

“AMD’s shares are expected to rise further since China’s regulator approved the merger between Analog Devices and Maxim Integrated,” said Hana Financial Investment analyst Kim Kyung-min. “The approval will accelerate an overall rebound in the Philadelphia Semiconductor Index.”

US chipmakers found further support from Intel Corp.’s announcement that it would provide commercial foundry services in the first phase of a broader program put forward by the US Defense Department. That lifted Intel by 2.4%; Applied Materials Inc. by 3.4%; and ASML Holdings by 3%.

The news prompted speculations that the US government will recognize semiconductors as a strategic material and the Pentagon will nurture the related ecosystem. This will strengthen Intel’s future growth, although it may not have a positive impact on its foundry business in the near term, analysts said.

BOTTOMED OUT?

Powered by such bullish factors, Samsung and SK Hynix advanced 3.1% and 1.9%, respectively. Some analysts believe  those shares have already bottomed out. Samsung Group’s plan to invest 240 trillion won ($206 billion) over the next three years in its core business, including semiconductors, helped boost Samsung Electronics’ shares.

“Anxiety surrounding the chip industry started easing,” said Kiwoom Securities’ analyst Han Ji-young.

Foreign investors turned to net buyers in the main Kospi amid a rebound in the Korean won after a selling spree over the previous 10 sessions.

Investors, however, remained concerned that the memory market may be peaking out.

“A sharp increase in DRAM suppliers’ sales raised customers’ inventory levels,” said IBK Securities analyst Kim Woon-ho. “The inventory adjustment is expected to push down prices from the fourth quarter.”

Taiwan-based market researcher TrendForce also predicted that growth in demand for specific products is likely to slow due to higher DRAM inventories.

Market researcher Omdia expected prices of DRAM for PCs, servers and mobile products to fall further in the first quarter of next year from the last three months of 2021.

Write to Jae-Won Park at wonderful@hankyung.com
Jongwoo Cheon edited this article.