[MarketING] Samsung Electronics and Hynix Smile After Long Time Thanks to Tax Support

On the 4th, the KOSPI opened at 2205.98, down 12.70 points (0.57%) from the previous trading day. The real-time KOSPI index was displayed on the electronic board in the dealing room at the Hana Bank headquarters in Myeongdong, Jung-gu, Seoul. The won-dollar exchange rate started at 1280.5 won, up 9.5 won from the previous trading day. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Song Hwajeong] Samsung Electronics and SK Hynix, which had experienced a prolonged decline in stock prices due to the semiconductor downturn, are showing a significant surge thanks to the government's tax support measures. The stock market, which started weak, also turned upward on the back of these leading stocks.

Index Turns Upward with Strength in Samsung Electronics and SK Hynix

As of 10:30 AM on the 4th, the KOSPI recorded 2,234.19, up 15.51 points (0.7%) from the previous day. The KOSDAQ rose 3.28 points (0.59%) to 678.23. Despite a decline at the start due to sharp drops in Tesla and Apple, the market reversed to an upward trend as Samsung Electronics and SK Hynix surged significantly. Samsung Electronics rose 2.89%, and SK Hynix increased by 4.63%.

The significant rise in Samsung Electronics and SK Hynix, which had been declining due to the semiconductor downturn, is attributed to the government's support measures. The government announced semiconductor investment tax support plans the day before. Accordingly, large semiconductor companies can receive up to a 25% tax credit on facility investments. Under the support plan, the tax credit rate for annual facility investments in national strategic technologies such as semiconductors, batteries, vaccines, and displays will increase from the current 8% to 15% for large corporations. For example, if Samsung Electronics invests 1 trillion KRW in semiconductor production facilities this year, it can receive a tax reduction amounting to 150 billion KRW. Additionally, for this year's increased investment (compared to the average of the previous three years), an extra 10% tax credit will be granted regardless of whether it is a national strategic technology. The government plans to legislate so that these support measures can be retroactively applied to investments made from January 1 of this year.

Temporary Rise Due to Support Measures, but Earnings Concerns Remain

Although Samsung Electronics and SK Hynix have shown gains, it is unlikely that this strength will continue due to inevitable earnings declines caused by the semiconductor downturn.

In particular, Samsung Electronics, which is scheduled to announce its Q4 earnings on the 6th, is expected to fall short of market consensus, signaling an earnings shock. Kiwoom Securities forecasts Samsung Electronics' Q4 operating profit at 5.1 trillion KRW, significantly below the consensus of 6.5 trillion KRW. Park Yuak, a researcher at Kiwoom Securities, explained, "Earnings declines are expected across all business divisions," adding, "The semiconductor (DS) division is expected to record shipments below the company's initial guidance."

Hana Securities projects Samsung Electronics' Q4 operating profit at 5.6 trillion KRW. Kim Rokho, a researcher at Hana Securities, said, "The consensus has been rapidly revised downward recently, and the results are expected to fall below that," adding, "The main cause of the earnings decline is a sharp drop in demand, with both shipments and prices of semiconductors and smartphones falling short of previous expectations, resulting in a significant earnings downgrade." Hana Securities forecasts Samsung Electronics' annual operating profit for this year at 20.8 trillion KRW, a 53% decrease from the previous year. Kim explained, "The sharp decline in demand for IT products, which began to be felt in the second half of last year, will continue to affect the first half of this year," and added, "Overall, uncertainty about demand is at its peak, so conservative forecasts are inevitable."

SK Hynix is expected to have recorded a loss in Q4 last year. IBK Investment & Securities forecasts SK Hynix's Q4 operating loss at 1.2 trillion KRW, marking a return to losses compared to the previous quarter. Kim Unho, a researcher at IBK Investment & Securities, said, "DRAM prices fell compared to Q3, causing the operating margin to drop by 23 percentage points," and added, "NAND's operating loss is expected to increase compared to Q3." He predicted an operating loss of 5.4 trillion KRW for this year. He said, "The demand bit growth (shipment increase rate converted to bit units) will improve compared to last year, but the extent will not be large," and added, "More time is needed to confirm demand improvement in the second half."