Korea SK Securities: Memory is the cheapest stock among the bottlenecks of the AI era "SK Securities continues to view the memory rerating as still only at its earliest stage. TSMC commands a high multiple because it is a platform style manufacturer that enables its customers' futures. The same holds for memory in the AI era. Structurally elevated earnings power and visibility, and the strengthened shareholder returns built on top of them, mean that the memory rerating and the unwinding of the Korean memory discount will move together. With Samsung Electronics and SK Hynix currently trading at around a 12MF P/E of 6.0x, their share prices indicate that they remain the cheapest stocks among the bottlenecks of the AI era. As value within the industry shifts and is reallocated, the metric to trust and follow is the change in earnings power, not a valuation framework anchored in the past. We maintain our Overweight rating on semiconductors."

Why did the KOSPI fall today? 1. Korean leverage trading has climbed to excessively high levels. 2. Ahead of Micron's earnings, profit taking is underway, with talk that buyside expectations have become too elevated. 3. Korean lawmakers are discussing imposing taxes on unrealized gains from stocks. 4. SK Hynix overtaking Samsung Electronics in market capitalization is being read as a market top signal. Commentary: With Samsung Electronics' earnings scale still exceeding that of SK Hynix, a reversal in market cap can be interpreted as a sign of market overheating. 5. A delay in SK Hynix's ADR listing. 6. The failure of the Korean market to gain inclusion in the MSCI developed markets index, and so on.

Samsung Electronics HBM4 Revenue Tops $1 Billion, Just Four Months After Becoming First to Mass Produce Samsung Electronics' sixth generation high bandwidth memory (HBM), HBM4, is reported to have become the first in the industry to surpass $1 billion (about 1.54 trillion won) in revenue. According to industry sources on the 23rd, Samsung Electronics posted these results as demand for HBM4 surged recently. Samsung achieved this roughly four months after it became the world's first to begin mass production shipments of HBM4 on February 12. If the cutoff point is set at the end of June, revenue is expected to exceed $1.2 billion (about 1.85 trillion won). As supply of Samsung's HBM4 has ramped up quickly right from launch, Samsung's share of the HBM market is also assessed to be expanding significantly.

SK Hynix Throttles HBM4 Production… Seeks Additional Profit by Expanding Supply Constrained Commodity DRAM SK Hynix is moderating the pace of its sixth generation high bandwidth memory (HBM4) ramp and placing greater weight on capturing the commodity DRAM market. With its HBM revenue share already exceeding 40 percent and an overwhelming lead established, the company is reallocating resources toward securing additional profit from commodity DRAM, where supply shortages are acute, rather than engaging in an aggressive capacity expansion race. According to industry sources on the 23rd, SK Hynix is reportedly delaying somewhat the conversion of some fifth generation HBM (HBM3E) production lines that were originally slated to switch to HBM4. The aim is to expand its ability to respond to the commodity DRAM market, which currently posts higher operating margins than HBM, in order to secure additional profit. The industry view is that, having already established a solid position in the HBM market, the company sees no need to rush its transition to HBM4 and HBM4E (seventh generation HBM). Behind this strategic shift lies a reversal in profitability between commodity DRAM and HBM. As of the first quarter of this year, the per gigabit (Gb) price of commodity DRAM still falls short of HBM, but the operating margin gap is estimated to have already widened to more than 15 percentage points (P). Daishin Securities forecasts that commodity DRAM operating margins could rise to a theoretical maximum of 90 percent within the year. A source familiar with SK Hynix said, "From the standpoint of SK Hynix management, they cannot ignore the fact that a competitor (Samsung Electronics) is already earning enormous profits from commodity DRAM rather than HBM." The source added, "SK Hynix's HBM4 is still undergoing NVIDIA's quality certification process, and production forecasts for NVIDIA's next generation chip 'Rubin,' which will carry HBM4, are trending downward, so there is no reason to accelerate the HBM transition." The view from overseas investment banks (IB) also supports this trend. Goldman Sachs assessed that it would be sufficient for SK Hynix to maintain a dominant position of more than 50 percent in HBM3 (fourth generation HBM) and HBM3E (fifth generation HBM) at least through 2026. Morgan Stanley pointed to memory wide pricing cycles, rather than a defense of HBM share, as the key driver of SK Hynix's value, and raised its earnings estimates by 56 to 63 percent on the basis of a forecast that DRAM average selling prices will rise 62 percent in 2026. Indeed, in its first quarter earnings release SK Hynix stated that DRAM average selling prices (ASP) rose in the mid 60 percent range, and it presented a plan to focus on meeting demand for high density server modules and mobile products. Its signing of a three year DDR5 supply agreement with Microsoft (MS) is also interpreted as a move to secure long term earnings visibility in commodity DRAM. On the other hand, as SK Hynix moves to adjust HBM4 volumes, the possibility of a share gain by its competitor Samsung Electronics is also growing. According to Counterpoint Research, SK Hynix's HBM market share stood at 57 percent in the fourth quarter of last year but is increasingly seen as likely to shrink, and some observers suggest that if Samsung Electronics succeeds in mass producing HBM4 in the second half of this year, SK Hynix's share could fall to the 50 to 60 percent range.