The Korea Herald


Samsung, SK hynix stocks plunge amid concerns of memory demand slowdown

By Yonhap

Published : Aug. 12, 2021 - 14:50

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Samsung chips plants in Hwaseong, Gyeonggi Province (Samsung Electronics) Samsung chips plants in Hwaseong, Gyeonggi Province (Samsung Electronics)
Shares in Samsung Electronics Co. and SK hynix Inc. -- South Korea's two largest chipmakers -- plunged amid concerns of a slowdown in memory demand, analysts said Thursday.

As of 10:30 a.m., Samsung was trading at 77,600 won ($67) after a 1.15 percent decline, while SK hynix slipped 3.79 percent to 101,500 won.

On Wednesday, Samsung shed 2.1 percent to close at 78,500 won, moving under the 80,000 mark for the first time since Aug. 2. SK hynix finished at 105,500 won after losing 6.2 percent, its sharpest fall since March 2020 when the market was hit by the COVID-19 outbreak.

Analysts said the plunge came as investors fear a price decline of DRAM with sluggish demand after the current quarter.

Samsung and SK hynix are the world's two largest DRAM makers, having a combined market share of more than 70 percent in the first quarter of the year, according to market researcher TrendForce.

TrendForce earlier expected contract prices of PC DRAM to decline by 0-5 percent in the fourth quarter of 2021.

"Demand for PC DRAM in the spot market began to show signs of bearish movement in early July ahead of time, as DRAM suppliers continued to lower prices in order to adjust their DRAM inventories," Trendforce said. "Gradual lifting of COVID-related restrictions in Europe and the US will also likely lower the overall demand for notebook computers, thereby pulling down the demand for PC DRAM."

The industry tracker also predicted contract prices of server DRAM to be "constrained to rise further" in the fourth quarter.

"On the whole, the general behaviors of DRAM buyers with regards to procurement have changed noticeably form the first half of this year," it said. "As the demand related to servers, PCs, and other major applications slows down, the whole DRAM market will gradually shift to a state of oversupply."

With negative outlooks coming out, some analysts even lowered target stock prices of the chipmakers.

"We are adjusting 2022 operating profit estimates for SK hynix to 10.8 trillion won from 14.4 trillion won," said Kim Kyung-min, an analyst at Hana Financial Investment, who cut SK hynix's target price to 130,000 won from 165,000 won. "We assumed DRAM's average price will go down 5 percent and 10 percent in the fourth quarter of 2021 and the first quarter of 2022, respectively, and stay put for the rest of 2022."

However, others said the price decline and possible down cycle in the memory market may not be long compared with the past.

"Major memory producers' inventory levels are less than a week, while production bottlenecks are deepening," said Lee Jae-yun, an analyst at Yuanta Securities. "It means that the market is not likely to repeat long price adjustments that we saw between the fourth quarter of 2018 and the fourth quarter of 2019. It could rebound from the third quarter of 2022 at the latest." (Yonhap)