Semiconductor Exports up 13.4% YoY in May
The authors are analysts of KB Securities. They can be reached at jeff.kim@kbfg.com and goun.whang@kbfg.com, respectively. -- Ed.
Semiconductor exports up 13.4% YoY in May
Korea's overall exports fell 20.3% YoY to USD20.3bn in May (5/1-5/20), according to the Korea Customs Service (5/21). However, semiconductor exports rebounded 13.4% YoY in May after plunging 17.8% YoY during the first 10 days of the month. We credit the robust turnaround to continued DRAM export growth (+41% YoY) coupled with a surge in multi-chip package (MCP) exports (+282% YoY).
Server demand solid in 2H20; cloud demand robust in China
The growth of server memory prices is expected to slow in 2H20, but prices are not likely to shift to a decline, because: (1) North American datacenters, major consumers of server memory, are no longer curtailing capex or experiencing earnings deterioration; and (2) sever memory demand is surging among cloud companies in China. Amid the COVID-19 malaise, capex forecasts for four North American IDCs have been lowered 8% compared to the previous outlook made earlier this year. However, capex estimates for Amazon and Microsoft, which account for 60% of server demand in North America, slightly edged up. Even Google and Facebook, whose capex forecasts were lowered about 18% compared to early this year, are expected to maintain a similar level of capex YoY. For 2H20, demand momentum from North American datacenters could fall short of previous expectations, but it should be offset by strong demand among Chinese cloud companies such as Alibaba, Tencent and Huawei. The Chinese government is expected to continue investing in datacenters/5G infrastructure to stimulate the economy and foray into new Southeast Asian markets. Notably, Alibaba announced a USD28bn capex plan in April for cloud infrastructure for the next three years.
Top picks: Samsung Electronics, SK Hynix and Hansol Chemical
Mobile memory demand and prices could descend as the U.S. government’s toughened regulations on Huawei (May 18) weigh on its smartphone shipments. However, the memory supply/demand balance will take a limited hit from the stricter trade rule. Given pent-up demand for 5G smartphones, mobile memory demand faces upside risks in 2H20. This is because: (1) Chinese smartphone companies, such as OPPO, VIVO and Xiaomi, are set to release low-end 5G phones in 2H20; (2) shipments of Apple’s first 5G phone, iPhone 12, are expected to top 80mn units; and (3) SEC is also likely to release several 5G smartphone models to improve sluggish IT & Mobile (IM) earnings and snatch back its lost market share. On the supply side, more than 20% of production capacity for mobile memory has already been converted to sever memory. In addition, an increasing production proportion of LPDDR5/128-layer NAND and weakened production yield should limit shipment growth. Against the above backdrop, we present Samsung Electronics, SK Hynix and Hansol Chemical as our industry top picks.