Semiconductor Industry
The fire in SK Hynix’s Wuxi plant is boosting DRAM prices. Equipment orders for Samsung Electronics’ Xian plant are raising expectations for performance improvements of semiconductor equipment makers after 4Q 2013. As such, stock prices for semiconductor-related companies are entering an upward cycle.
On September 2, SK Hynix recorded a closing price of 31,150 won (US$29.06) in the stock market, up by 4.01% (1,200 won, US$1.12). As the fire in the Wuxi plant raises semiconductor prices, stock prices are also looking up.
According to semiconductor e-commerce site DRAMeXchange, 4GB DDR3 DRAM module prices in September rose over 9% compared to July. The hike in semiconductor prices reflects concern that instability in supply and demand will continue following the fire. SK Hynix is currently filling up part of the decreased manufacturing volume with inventory, also seeing effects of hiked DRAM prices.
“The Wuxi facility accounts for approximately 12% of the world’s DRAM production. The fire will affect approximately 6% of global supply,” said Nam Dae-jong, researcher at Hana Daetoo Securities. “Up until September, inventory made up for the decreased supply, leading to a price hike. As PC makers try to stock up inventory, DRAM prices will continue to rise until 1Q 2014,” he added.
With positive performance prospects by Shin Jong-kyun, CEO of Samsung Electronics’ IT and mobile business, Samsung Electronics has recovered to the 1.4 million won line one business day prior to the announcement of 3Q performance. Samsung Electronics closed at 1.418 million won (US$1,322.99), up by 2.60% (36,000 won, US$33.62). Shin said that “3Q performance will surpass 2Q records,” raising hopes that operating profits could break through 10 trillion won (US$9.3 billion).
The electronics industry rose by 2.05% in the stock market on that day.
In the KOSDAQ, plans for full-scale equipment orders from Samsung Electronics’ Xian plant beginning in 4Q boosted the semiconductor industry. The semiconductor industry index rose by 1.53% to record 820.10. LDT and Semiteq, which are included in the index, hit the price limit. Wonik IPS (7.98%) and Clover Hitech (7.08%) also saw big leaps.
“Samsung Electronics is planning to build a new 3D NAND silicon wafer fabrication facility in Xian. We can expect full-scale equipment orders to begin in 4Q. Additional orders are expected in 3Q 2014, which means large orders for semiconductor equipment makers should last a while,” said Song Jong-ho, researcher at KDB Daewoo Securities.
As the semiconductor industry recovers, several private companies in related industries are preparing for an IPO in order to invest in production facilities with a mid to long-term perspective. PCB circuit board printing equipment maker Interbex has selected KDB Daewoo Securities as the lead bank in preparation for an IPO in the KOSDAQ market. Semiconductor-related stripper maker LTC and semiconductor tester TESNA are also planning for an IPO in the KOSDAQ.
“As Samsung Electronics and SK Hynix begin full-scale investments in additional facilities, related semiconductor equipment makers are preparing an IPO in order to meet increased volume. If investments continue to increase until 2015, we can expect high growth in semiconductor equipment makers,” said Lee Sun-tae, researcher at NH Investment & Securities.
“Korean semiconductor makers are increasing investments in facilities as can be seen in Samsung Electronics’ Xian plant. Furthermore, fire in the SK Hynix plant is pulling up semiconductor prices, having a positive effect on the overall semiconductor industry,” explained Song.