TV/display Demand to Rebound
The authors are analysts of KB Securities. They can be reached at jeff.kim@kbfg.com and goun.whang@kbfg.com, respectively. -- Ed.
Samsung Electronics (SEC) and SK Hynix (SKH) shares skyrocket
SEC/SKH shares ended June 3 up 6.0%/6.5% (vs. previous closing prices), marking 28%/29% increases from March troughs of KRW42,500/KRW69,000. Over the last three months, SEC/SKH shares struggled amid concerns of the global slowdown undermining demand. The June 3 surge seems to have been driven by: (1) expectations that stronger-than-expected server DRAM and SSD demand in 2H20 will limit the drop in memory chip ASP; (2) forecasts for display panel and smartphone demand to bottom out in 2Q20; and (3) optimism about earnings, as demand for TVs and other home appliances has continued to exceed expectations since May.
Semiconductor prices to be stronger than expected in 2H20
Contrary to market concerns, DRAM and NAND prices are expected to remain flat QoQ in 3Q20. Currently, growing server memory chip stockpiles at hyperscalers have created concern over a dive in server DRAM prices in 3Q20. However, we believe the price drop would be limited to only 2-4% because: (1) capex for North American data centers will continue to rise YoY in 2H20; and (2) memory chip demand from Chinese cloud-computing companies has been stronger than expected. Meanwhile, mobile DRAM shipments will bottom out in 2Q20 despite weak demand in 1H20. Global smartphone shipments in 2H20 are projected to reach 710mn units (+40% HoH; 58% of annual total) thanks to the release of iPhone 12 and 5G handsets from Chinese manufacturers. NAND demand is expected to top estimates in 3Q20 considering growing demand for enterprise SSD (increase of online business activities) and greater use of high-capacity SSDs for PCs and game consoles (game console SSD demand estimated at 1.7% in 2020 vs. 0.2% in 2019).
TV/display demand to rebound
After bottoming out in April, the TV and LCD industry is expected to start to recover in June as rising demand depletes retail inventories. The size of the global TV market should contract 10% YoY to 200mn units in 2020. We forecast shipments to recover from a trough of 43.72mn units (-2.4% QoQ) in 2Q20 and reach 55.9mn units (+27.9% QoQ) in 3Q20. SEC TV shipments should grow 7% YoY as (1) it takes more market share on the back of its expanded QLED TV lineup and price cuts; and (2) demand for premium TVs (particularly 65” and 75” models) rises at a fast clip amid the pandemic. Hence, SEC should significantly ramp up its purchase of TV-related materials (QD materials) and parts (power module, LDI, etc.), encouraging an upturn in LCD panel price in June after hitting a bottom in May. The main beneficiaries will be SEC and SKH. Among small-cap stocks, LG Innotek, ITM Semiconductor, Hansol Chemical and Hansol Technics stand to gain.