[Practical Investment] "The Leader Stock Has Returned"... Spring Breeze Blowing in Semiconductor

Stock Market Boosted by Samsung Electronics' Rally
Samsung Electronics Recovers to 60,000 Won Level After About Five Months
Foreign Buying Drives Stock Price Up
Rising Expectations for Industry Recovery

The spring breeze is blowing through the stock market as Samsung Electronics, the leading stock that had been sluggish, has revived. Samsung Electronics recovered to the '60,000 won level' for the first time in five months, pushing the KOSPI above the 2,600 mark. Warmth is returning to the semiconductor sector, which had been cold since the second half of last year, raising market expectations.

Yonhap News

The previously sluggish semiconductor sector leads again

According to the Korea Exchange on the 26th, Samsung Electronics rose 11.01% as of the 24th of this month, and SK Hynix also increased by 11.2%. During the same period, the KOSPI rose 3.92%. The KOSPI, which had fallen below 2,600 at the end of last month due to U.S.-imposed tariffs and recession concerns, successfully stabilized above 2,600 thanks to the semiconductor sector's upward momentum. The strong performance of semiconductor stocks also boosted the returns of related exchange-traded funds (ETFs). The TIGER Semiconductor TOP10 Leverage ETF rose 14.39% this month, and the KODEX Semiconductor Leverage ETF increased by 14.24%.

Lee Kyung-min, a researcher at Daishin Securities, analyzed, "Semiconductors have driven 75% of the KOSPI's rise in March. Samsung Electronics' stock price recovering to 60,000 won after five months is a result of expectations for industry and earnings improvement combined with massive foreign net buying, resembling the semiconductor rebound in the first quarter of 2017."

Recently, expectations for a rebound in the legacy (general-purpose) semiconductor industry and inflows of foreign buying have been cited as factors behind the semiconductor sector's strength.

Cha Yong-ho, a researcher at LS Securities, said, "The recent price rebound centered on legacy memory industries is considered a phase of expectation formation. This is due to factors such as demand-driven expectation formation, disruptions at China's Changxin Memory Technologies (CXMT), and NAND price increases." He added, "The scale of China's 'Iguhwanxin' (replacement of old with new) subsidies allocated this year has more than doubled compared to 2024, stimulating domestic demand in China. Additionally, recently, Chinese big tech companies have placed large orders for Nvidia's H20 chips, creating expectations for server DRAM demand." CXMT is reportedly unable to meet demand for LPDDR5X in China and also fails to meet the specification requirements of big tech companies for DDR5. NAND suppliers have announced price increases of over 10% in April.

Lee Seung-woo, a researcher at Eugene Investment & Securities, said, "Considering the increase in China's H20 demand after the deep-sea cycle, the recovery of legacy semiconductors due to Iguhwanxin, and the supply restriction effect from investments in high-bandwidth memory (HBM), the DRAM cycle will gradually shift to an upturn. Last week, the spot price of DDR4 rose about 5%, and the strength centered on HBM and DDR5 is spreading to DDR4. Accordingly, the outlook for the memory semiconductor market and corporate earnings is being revised upward, and valuations are likely to be applied more favorably."

Recently, Morgan Stanley raised the target prices for Samsung Electronics and SK Hynix, reflecting the possibility of improvement in the semiconductor industry.

The inflow of foreign buying has driven the semiconductor sector's strength. Foreign investors, who had maintained a selling stance on Samsung Electronics for some time, have recently been buying the stock, showing a changed attitude. Foreigners have net purchased Samsung Electronics worth 1.3263 trillion won as of the 24th this month, making it the most bought stock. Last year, foreigners sold more than 10 trillion won worth of Samsung Electronics, making it the most net sold stock. Even this year, until February, foreigners net sold 1.9 trillion won worth of Samsung Electronics, also the largest amount sold.

Samsung Electronics' earnings expected to rebound after bottoming out in Q1

While signs of industry improvement are emerging and expectations for earnings improvement are growing, Samsung Electronics' earnings are expected to remain sluggish through the first quarter of this year.

According to financial information provider FnGuide, the consensus for Samsung Electronics' Q1 earnings (average of securities firms' forecasts) is sales of 77.1144 trillion won, up 7.23% year-on-year, and operating profit of 5.2777 trillion won, down 20.11%.

The securities industry expects Samsung Electronics' Q1 earnings to fall short of market expectations. Choi Bo-young, a researcher at Kyobo Securities, explained, "Q1 sales are expected to be 77.5 trillion won and operating profit 4.5 trillion won, below consensus. The expected Q1 earnings slump is already known. It reflects mobile and PC inventory adjustments due to weak front-end markets and resulting price weakness. Despite high unit prices of HBM, volumes have decreased. Foundry is expected to post a loss of about 2.7 trillion won due to high inventory and low utilization rates."

There is a forecast that Q1 will be the earnings bottom. Kim Woon-ho, a researcher at IBK Investment & Securities, said, "Samsung Electronics' Q1 earnings are expected to fall short of previous forecasts due to weakness in the semiconductor business unit, Device Solutions (DS). However, earnings are expected to improve after Q1, and the HBM situation is not expected to worsen further. Additionally, benefits from the rebound in DRAM prices are anticipated."

The consensus for SK Hynix's Q1 earnings is sales of 17.1443 trillion won, up 37.93% year-on-year, and operating profit of 6.4998 trillion won, up 125.22%. SK Hynix's earnings are generally expected to meet market forecasts. Researcher Cha Yong-ho said, "SK Hynix's Q1 earnings are expected to meet consensus with sales of 17.5 trillion won and operating profit of 6.5 trillion won. Q1 HBM sales are expected to reach 6.3 trillion won, a 7% increase from the previous quarter despite the off-season, due to strong big tech demand and favorable exchange rates."