SK Hynix Leads Samsung Electronics in HBM3 and DDR5 Competitiveness
Q3 Earnings Forecast Revised Upward... Stock Price Needs Better Performance to Rise Further
Foreign investors are showing mixed trading patterns in semiconductor stocks. Amid growing expectations for a semiconductor market rebound, Samsung Electronics is being sold while SK Hynix is being bought. This is interpreted as influenced by SK Hynix's competitive edge in the high-bandwidth memory (HBM3) business and its faster pace of earnings improvement.
According to the Korea Exchange on the 17th, SK Hynix ranked first in net foreign buying in October so far, with 342 billion KRW. It was followed by Kia, EcoPro, Alteogen, and KT. On the other hand, Samsung Electronics was the top stock in net foreign selling, followed by LG Energy Solution, SK Innovation, EcoPro BM, and Samsung SDI.
A notable characteristic of foreign investors is their contrasting trading behavior in the semiconductor and battery sectors. Despite expectations of a semiconductor market rebound, foreign investors have sold nearly 1 trillion KRW (913 billion KRW) worth of Samsung Electronics shares this month. Noh Geun-chang, a researcher at Hyundai Motor Securities, pointed out, "Despite solid third-quarter earnings, skepticism about Samsung Electronics' competitiveness in the HBM3 market has slowed the pace of stock price revaluation."
Looking at the stock prices this year, both Samsung Electronics and SK Hynix rebounded after hitting lows in January, but only Samsung Electronics has been declining again in the second half. Samsung Electronics closed at 67,300 KRW on October 16, down 8.5% from its intraday high of 73,600 KRW on July 4. SK Hynix closed at 124,100 KRW on October 16, down 3.7% from its intraday high of 129,000 KRW on July 28.
The reason foreign investors prefer SK Hynix more is its position in the HBM market. The dominant view is that SK Hynix holds an advantage, having secured Nvidia as a major client. SK Hynix exclusively supplies fourth-generation HBM3 to Nvidia, the largest HBM customer.
Meanwhile, it is reported that SK Hynix has entered the final qualification test phase to supply Nvidia with the fifth-generation HBM3E. Qualification testing refers to the stage of testing product performance before delivery to the client. Usually, after qualification testing, a supply contract is signed within one to two months. In contrast, Samsung Electronics' HBM supply has been delayed compared to SK Hynix.
Reflecting this, expectations for SK Hynix's third-quarter earnings are also rising. Although losses are still expected this year, the deficit is forecasted to shrink rapidly. According to FnGuide, SK Hynix's estimated operating loss for the third quarter is 1.6424 trillion KRW. Securities firms had projected an operating loss of 2.1879 trillion KRW three months ago, revised it to 1.7116 trillion KRW a month ago, and have recently updated it again.
Han Dong-hee, a researcher at SK Securities, said, "SK Hynix's dominant position in HBM3 and DDR5, which underpins its outperformance within the DRAM sector, is unlikely to be damaged in the short term," adding, "Considering the rebound due to seasonality in the Greater China mobile market and the inventory replenishment cycle of upstream companies, the visibility of SK Hynix's underperformance is low." He diagnosed, "Given that it is showing the fastest earnings improvement in the sector and the price rebound outlook due to continued production cuts in the memory industry, the stock price floor will gradually rise."
Kim Woon-ho, a researcher at IBK Investment & Securities, also evaluated, "Earnings improvement is expected to continue, and SK Hynix is likely to maintain its advantage in the high-end DRAM market," adding, "The differentiated product mix and average selling price movements compared to competitors will continue in the second half." He further noted, "However, the current stock price already reflects short-term momentum sufficiently. For additional stock price gains, earnings improvement must accompany."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
