Volatility in Memory Chip Industry Cycle to Be Reduced
The author is an analyst of KB Securities. He can be reached at jeff.kim@kbfg.com. -- Ed.
Semiconductors: A key strategic asset for the economy
We maintain BUY and 12m TP of KRW85,000 for Samsung Electronics. We believe the visit to the company’s semiconductor factory in Pyeongtaek by U.S. President Joe Biden on the first leg of his inaugural trip to Asia demonstrates that Samsung’s semiconductors have become a key strategic asset for the economy and national security, and that there lies significance in the fact that Korea had been chosen as his first-stop destination, unlike in the cases of his predecessors (George W. Bush in 2002, Barack Obama in 2009, Donald Trump in 2017) who had opted for Japan. Moreover, at a time when the importance of securing global semiconductor supply chains has been underscored by the pandemic and the Russia-Ukraine war, this can be interpreted as an intent to strengthen U.S. strategic ties with Korea’s semiconductor industry.
Samsung’s Pyeongtaek factory: (1) World’s largest fab; (2) World’s first GAA-based 3nm production; (3) Collaboration with U.S. semiconductor equipment makers
We attach the following significance to President Biden’s visit to the Pyeongtaek factory:
(1) The world’s largest semiconductor fab is likely to play a central role in the global semiconductor (memory, non-memory) supply chain.
(2) The commencement of production for the world’s first 3nm gate-all-around (GAA) process at P3 in Pyeongtaek should enable Samsung to compete with TSMC.
(3) Collaboration for supply chain management with U.S. semiconductor equipment makers (Lam Research, Applied Materials, KLA) has strengthened.
Volatility in memory chip industry cycle to be reduced
While the outlook for semiconductor demand in 2H22 remains murky due to unfavorable macro environment (e.g., China’s lockdown, inflation, the Russia-Ukraine war), growth in supply should also be limited; therefore, volatility in the memory chip industry cycle is likely to be reduced. Strong server memory demand (i.e., biggest server upgrades in five years at four North American data centers) should prop up demand, while accelerating node migration should lower productivity (i.e., limited supply growth). Given, also, that SEC’s management is likely to focus more on profitability than market share expansion for the time being, semiconductor earnings are highly likely to exceed market expectations.