Limited Trickle-Down Effect in Semiconductors, Industry Polarization
Equipment Makers Await Customer Investments and Recovery
Set and Component Makers on High Alert to Protect Profitability
Recently, domestic semiconductor materials company A has been facing growing concerns. The company made large-scale investments to secure inventory in advance, responding proactively to requests from its clients, such as Samsung Electronics and SK Hynix, both memory manufacturers. However, these efforts have not translated into actual orders. As Samsung and SK Hynix adopt a conservative approach to memory facility investments, materials companies are left burdened with increasing inventory management costs. A representative from company A lamented, "We have increased our inventory, but prices are actually falling, and as client investments are delayed, our profitability continues to deteriorate."
While Samsung Electronics and SK Hynix have both posted record-breaking performances, ushering in a 'golden era of memory,' the so-called 'trickle-down effect' is not being felt within the semiconductor ecosystem. In fact, the semiconductor equipment industry is suffering from intensified price competition for orders. Paradoxically, as manufacturers' results improve, equipment prices are being driven down even further.
Inverse Performance: Equipment Companies See Sharp Declines as Samsung Electronics Thrives
According to industry sources and the electronic disclosure system on January 16, the performance gap between memory manufacturers and equipment suppliers in the downstream sector is becoming increasingly pronounced. Contrary to expectations that a memory boom would directly benefit materials, components, and equipment companies, the trickle-down effect has been blocked, resulting in clear polarization.
Comparing the third quarter to the second quarter of last year, Samsung Electronics' operating profit surged from 467.61 billion won to 1.21661 trillion won, nearly a threefold increase. In contrast, during the same period, the operating profit of Hanmi Semiconductor (post-processing), a leading domestic equipment company, decreased from 86.4 billion won to 67.8 billion won. Jusung Engineering (front-end processing) also saw its operating profit halved, from 6.6 billion won to 3.4 billion won. Even compared to the semiconductor (DS) division of Samsung Electronics, equipment companies continue to feel relatively deprived. Samsung Electronics' DS division turned a profit in the first quarter of last year with an operating profit of 191 billion won, which then soared to 645 billion won in the second quarter. The division maintained a steep recovery in profitability, recording 386 billion won in the third quarter. In the fourth quarter, buoyed by the full-scale supply of high-bandwidth memory (HBM)3E and a further increase in memory prices at the end of the year, operating profit is expected to reach the 500 billion won range, according to provisional estimates.
A representative of a domestic equipment company commented, "Things are improving little by little, but this has not yet led to securing profits or price increases. Prices will only rise again when we enter a phase of supply shortages." Another equipment company official added, "If Samsung Electronics and SK Hynix ramp up equipment orders, this will eventually be reflected in our results, but that time has not come yet."
Materials and Equipment Industry: "Time Lag Before Results Reflect... Hoping for HBM Effect"
On the second day of CES on the 7th (local time), RAM equipped with SK Hynix memory was exhibited at a Chinese company's booth at the Las Vegas Convention Center (LVCC) in Nevada, USA. Photo by Yonhap News Agency
In contrast to the spectacular recovery of semiconductor manufacturers, materials and components companies in the downstream sector are currently experiencing only superficial benefits. The lingering effects of aggressive price-cutting competition, which was necessary to secure client orders during the previous industry downturn, are still holding them back.
A representative from a semiconductor materials company explained, "Although memory manufacturers are increasing their utilization rates, the low-priced supply contracts signed during the previous downturn are still in effect. At this stage, instead of focusing on improving profitability, we are concentrating on regaining market share and securing inventory, while waiting for a genuine rebound." Equipment companies are also enduring a 'lean period' until actual orders are reflected in their results, as manufacturers remain cautious about process miniaturization and expanding new production lines.
Experts, however, note that the surge in data center demand driven by the artificial intelligence (AI) boom represents a structural change, not a temporary phenomenon. The explosive and sustained demand for high value-added products such as HBM and DDR5 means that the massive profits accumulated by memory manufacturers will inevitably lead to increased capital expenditures (CAPEX).
Park Jaekeun, President of the Korea Society of Semiconductor & Display Technology and professor at Hanyang University, stated, "There is typically a time lag of more than six months before orders are reflected in actual sales. Only after equipment is delivered and fully operational will material input increase and the performance of the lower-tier ecosystem begin to follow."
"Chip Prices Are Alarming": Set and Component Companies Struggle with Cost Pressures
On the 9th, busy construction work is underway at the Yongin Semiconductor Cluster General Industrial Complex construction site in Wonsam-myeon, Cheoin-gu, Yongin-si, Gyeonggi-do. Photo by Yonhap News.
The rise in memory prices is directly impacting set manufacturers that produce finished products such as smartphones, TVs, and home appliances. As memory, which accounts for a large portion of production costs, becomes more expensive, these companies are facing urgent challenges in maintaining profitability.
Lee Cheong, President of Samsung Display, recently suggested at 'CES 2026,' the world's largest electronics and IT exhibition held in the United States, that rising memory prices could trigger a chain reaction of cost pressures in related component industries such as displays. Roh Taemoon, President of Samsung Electronics, also expressed concerns, stating, "We are deeply troubled about the need to adjust smartphone prices due to rising chip costs."
Kim Jeonghoe, Vice Chairman of the Korea Semiconductor Industry Association, analyzed, "When the price of a component with a monopolistic position, like Nvidia's graphics processing unit (GPU), rises, demand-side companies are left with no options. Given the current market structure, there is no immediate solution to this problem."
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