Top Picks: Samsung Electronics, SK Hynix
The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed.
With many DRAM makers announcing plans for DRAM capex expansion for 2H21, DRAM supply is to expand from 2H21. Global PC and server demand remain strong thanks to rising non-face-to-face contact demand amid Covid-19, but it remains uncertain whether the robust demand trend will sustain into 2022. We forecast that DRAM prices will decline from 1Q22. Meanwhile, supply shortages have worsened in the global foundry market, and in this regard, we predict that global foundry and related equipment makers will continue to enjoy sound earnings growth going forward. We maintain a Positive view on the semicon sector, recommending SEC as a sector top pick.
TSMC, SEC, and GF are to expand their foundry investment by 70~100% y-y in 2021 in order to resolve the global foundry shortage. And, considering the adoption of reshoring policies for the foundry industry in the US and Europe, we forecast such active foundry investment will sustain into 2022. With investment expanding for both foundry and DRAM, semiconductor equipment plays are set to benefit. In addition, mounting DRAM scaling challenges (including EUV application for patterning, capacitor shift from cylinder to filler type, bit and wordline resistance and capacitance improvement, and peri transistor change into high-K metal gate), should benefit global semicon equipment companies such as AMAT, ASML, and Lam Research.
Top pick 1: SEC (005930.KS); TP of W95,000
With many DRAM makers announcing plans for DRAM capex expansion for 2H21, DRAM supply is to expand from 2H21.
Global PC and server demand remain strong thanks to rising non-face-to-face contact demand amid Covid-19, but it remains uncertain whether the robust demand trend will sustain into 2022.
SEC is to book sound 2Q21 results, with OP rising to W10.2tn (+9% q-q) on rising server DRAM prices.
The memory price uptrend is expected to sustain till end-2021.
Top pick 2: SK Hynix (000660.KS); TP of W170,000
With many DRAM makers announcing plans for DRAM capex expansion for 2H21, DRAM supply is to expand from 2H21.
Global PC and server demand remain strong thanks to rising non-face-to-face contact demand amid Covid-19, but it remains uncertain whether the robust demand trend will sustain into 2022.
SK Hynix’s takeover of Intel’s NAND business should create strong synergies from 2022.
The fact that SK Hynix has been rapidly catching up with its competitors in the DRAM and NAND markets bode well for its future earnings.