Semiconductor Big Cycle Coming... Equipment Stocks Soar

[Asia Economy Reporter Koh Hyung-kwang] As forecasts predict a significant improvement in the semiconductor industry next year, semiconductor equipment and materials stocks are gaining renewed attention.

According to the Korea Exchange on the 27th, semiconductor equipment company PSK closed at 37,850 KRW on the KOSDAQ market the previous day, up 3.2% from the previous trading day. Compared to the end of last month’s price (30,900 KRW), it rose 22.5%. PSK is the global number one company in the PR Strip equipment sector used for photoresist removal in the semiconductor etching process.

Other semiconductor equipment-related stocks such as EO Technics and Wonik IPS have also risen 21.2% and 18.1%, respectively, since the beginning of this month. Wonik IPS develops and manufactures semiconductor and display equipment, while EO Technics produces manufacturing equipment used in semiconductor, printed circuit board (PCB), and smartphone production facilities. Semiconductor inspection equipment manufacturer Koh Young and semiconductor automation equipment maker Hanmi Semiconductor have also seen their stock prices rise nearly 20% this month alone.

The upward trend in these stocks appears to reflect expectations that the semiconductor industry will enter a growth phase next year. There are even forecasts that memory semiconductors will enter a super boom period in 2021 and 2022 due to demand recovery and supply constraints. Lee Seung-woo, a researcher at Eugene Investment & Securities, said, "From the second half of next year through 2022, as the memory cycle rises in earnest, the supply-demand and valuation of memory stocks, which have been neglected, could recover significantly. Considering the localization policy for materials, parts, and equipment and the expanded investments by the two leading domestic semiconductor companies, the performance of major domestic semiconductor equipment stocks next year is also expected to improve."

In particular, the securities industry expects Samsung Electronics’ non-memory semiconductor business sales and operating profit to achieve record highs next year, anticipating aggressive investment by Samsung Electronics. This is expected to benefit domestic semiconductor equipment companies. Lee Jae-yoon, a researcher at Yuanta Securities, advised, "It is necessary to pay attention to the growth potential of semiconductor materials and parts sectors’ performance due to increased capital investment by Samsung Electronics."

There is also an opinion that investing in materials stocks is relatively more stable than equipment stocks. Kim Kyung-min, a researcher at Hana Financial Investment, explained, "Samsung Electronics’ expanded semiconductor facility investment next year is positive for both materials and equipment stocks, but equipment stocks tend to have a performance pattern of strong first and fourth quarters with weaker middle quarters. From an investor’s perspective, this requires a shorter-term approach, which can be challenging, so materials stocks may be easier to invest in."