Japan-based Nomura Securities Co. said the country’s curbs on semiconductor material exports can help the South Korean semiconductor industry. This is because the price of memory chips will rise if an inventory is reduced through production cuts that can help ease the current oversupply situation.
“The domestic semiconductor industry has a large stock of complete products so partial production cuts can be positive for semiconductor prices in the short term,” said Nomura Securities Research Center head Chung Chang-won during a media conference on “South Korean stock market outlook” held in the head office in Seoul on July 12. Chips have flexible prices depending on supply and demand as they are a core material in the digital age. The recent measures by Japan will help curtail production of the South Korean semiconductor industry, such as Samsung Electronics Co. and SK Hynix Inc., and this will also lead to lower stocks and higher prices, according to Chung.
He added, “When a massive fire broke out at a SK Hynix production facility in China in the past, the price of Samsung Electronics shares showed a sharp increase. Share prices have already started to rise again this time. Companies say in their IR that they have six weeks worth of the inventory of complete semiconductor products but they actually have little more than that. They will not be hit hard even when they stop factory operation for two months and they will rather be able to sell their products thanks to a short supply.” In short, Japan has helped saving the domestic semiconductor industry’s distress for stock supply.
In regard to the aftermath in the future, Chung said, “Japan is highly unlikely to completely ban exports of these materials to South Korea.” Since South Korea’s market share in the global DRAM market accounts for about 75 percent, the price of memory chips will skyrocket if the domestic industry completely halts their production for only two months.