Expectations Rise for Related Stocks Amid Samsung Electronics' 8 Trillion Won 5G Equipment Contract

Korea Investment & Securities Picks RFHIC as Top Pick

Samsung Electronics Seocho Building. Photo by Mun Honam munonam@

[Asia Economy Reporter Kum Boryeong] As Samsung Electronics is set to supply approximately 8 trillion KRW worth of 5th generation (5G) communication equipment to Verizon in the United States, expectations for benefits to related stocks are emerging.

Samsung Electronics announced yesterday that it has signed a wireless communication solution supply contract worth 7.9 trillion KRW with Verizon in the US.

The contract period is until December 31, 2025. Considering that it is before the start of mass production, the actual supply is estimated at about 1.6 trillion KRW annually over five years. The market views this order as highly significant since it is Samsung Electronics' first contract with a global mega telecommunications company.

Samsung Electronics' stock price showed an upward trend. On the previous day, it closed at 56,500 KRW, up 1.62% (900 KRW) from the previous session. As of 10:47 AM on the day, it recorded 58,100 KRW, up 2.83% (1,600 KRW) from the previous day.

Samsung Electronics' North American orders have only been completed with Verizon so far, with follow-up orders pending. Among the three major US telecom companies, AT&T and T-Mobile (merged with Sprint) are also expected to place 5G equipment orders soon. Researcher Jo Cheolhee of Korea Investment & Securities said, "Although the order size from AT&T and T-Mobile is smaller than Verizon on a single company basis, the combined order amount is expected to exceed Verizon's," adding, "Samsung Electronics' orders from these two companies (AT&T, T-Mobile) within this year could rival the order amount from Verizon."

This contract has increased expectations for stocks related to communication equipment. KM Double U, Seojin System, Ace Tech, RF Tech, Oi Solution, RFHIC, and Namu Technology are major suppliers in Samsung Electronics' supply chain. Researcher Jo said, "When Samsung Electronics wins orders, the entire domestic communication equipment ecosystem benefits."

In particular, Korea Investment & Securities named RFHIC as the top pick among communication equipment stocks. RFHIC supplies gallium nitride (GaN) transistors to Samsung Electronics. With expected sales to Samsung Electronics exceeding about 100 billion KRW next year, it is anticipated to offset the sluggish sales to Huawei. The target stock price was also raised from 44,000 KRW to 52,000 KRW.