Samsung Electronics Plunges 8%: Complex Reasons Why Share Prices Don't Rise Despite Semiconductor Industry Improvement

The recent surge in corporate profits due to rising semiconductor prices has become an uncomfortable reality for management. SK Group Chairman Chey Tae-won also mentioned his discomfort with the rise in semiconductor prices and the consequent surge in gross profit margin and operating profit margin. This is because it creates complex problems beyond simple profit growth.

US and global big tech companies are intensifying their scrutiny of rising semiconductor prices, while internally, stakeholders are increasing demands for dividends and wage hikes. Additionally, the government continues to demand large-scale investment expansion, leaving management under significant pressure to balance short-term profits with long-term sustainability.

The Corporate Governance Forum strongly criticized the management of Samsung Electronics and SK Hynix, stating that their strategic ambiguity led to the undervaluation of their stock prices. They argued that if this severe undervaluation is not resolved by next year's stock prices, the management of both companies should be prepared to resign. They warned that if management's improvement efforts are insufficient, shareholders might consider opposing the re-election of directors whose terms are expiring.

The Forum demanded that management enhance predictability and provide realistic guidance to restore shareholder trust. They believe that the current uncertain management strategy leads to market misunderstandings and negatively impacts stock prices. Such criticism acts as pressure for management to establish a clear vision and action plan for long-term corporate value enhancement, not just short-term performance.

These strong demands can be interpreted as a call for structural changes to improve corporate governance and maximize shareholder value, beyond mere dissatisfaction.

Micron's pledge to use 100% of its free cash flow for shareholder returns sparked controversy when compared to the shareholder return policies of Samsung Electronics and SK Hynix. When domestic companies stated they would return 50% of their free cash flow, the market criticized this as unreasonable through a simple comparison with Micron.

However, Micron's 100% return has ambiguous aspects regarding its target, requiring a precise understanding of its reality. In contrast, Samsung Electronics and SK Hynix are being asked for specific return targets and plans. Such a simplistic comparison of return ratios can lead to market misunderstandings, and it is crucial to comprehensively consider each company's financial situation, investment plans, and detailed shareholder return policies.

Samsung Electronics and SK Hynix are currently facing a complex dilemma, which is negatively impacting their stock prices. The government is pressuring both companies to make large-scale investments in the US and Korea, forcing them to plan massive capital expenditures.

At the same time, labor unions are strongly demanding wage increases and improved working conditions, while shareholders are pushing for increased dividends and treasury stock buybacks to boost shareholder value. In this situation of conflicting demands, corporate management finds it difficult to find a balance, which acts as a factor limiting stock price appreciation.

This year, the Korean stock market experienced a severe supply-demand imbalance, with foreigners selling approximately 190 trillion won and individual investors buying approximately 150 trillion won. Institutional investors also sold most of their holdings, reducing market liquidity. This supply-demand situation is identified as a major cause of the current abnormal trend in stock prices.

Both the volume formed at past highs and the volume purchased by individual investors this year are acting as overhead resistance for current stock prices. This means that if the stock price rises above a certain level, selling pressure for profit realization is waiting. Despite clear improvements in the semiconductor industry, this complex situation, where supply and demand factors suppress stock price increases, persists.

Despite the sharp decline in Samsung Electronics and SK Hynix stock prices, institutional investors are adopting a wait-and-see attitude rather than immediate buying. According to inquiries by Park Byung-chang, CEO of MP Partners, few institutional investors have a proactive 'I'll buy if it drops' stance at the moment.

Institutions are judging that it is necessary to closely monitor supply and demand conditions and policy changes until the end of the year. This is because they believe the current market's supply-demand imbalance and uncertainty have not been resolved, suggesting a strategy of considering entry timing after the situation becomes clearer rather than rushing into purchases.

It is noteworthy that despite Samsung Electronics and SK Hynix stock prices falling by more than 10% over two days, active buying interest is not entering the market. Generally, in such sharp declines, investors looking to profit from low-point buying are expected to act aggressively, but such movements are not currently observed.

This suggests that the market situation is not conducive to short-term low-point buying. Investors are not readily purchasing because they perceive a greater possibility of further declines or uncertainty, rather than simply judging that prices have become cheap. This market reaction implies that the negative factors reflected in current stock prices may not be short-term issues.

Investors with high exposure (over 80%) to Samsung Electronics and SK Hynix are advised to respond cautiously. Although a significant price correction has occurred, with prices already down about 30% from their peak, an immediate rebound is difficult to expect due to the complex interplay of supply-demand snags and deteriorating investor sentiment.

Experts recommend a strategy of waiting and taking time rather than aggressively selling at current prices. This situation emphasizes the need for a medium-to-long-term perspective rather than short-term movements. Patience until market uncertainties resolve and supply-demand conditions stabilize may be a wise choice over hasty trading.

There are various types of exchange-traded funds (ETFs) available for investing in the semiconductor sector, but each ETF's operating strategy and constituent stocks vary greatly by issuer. Therefore, when investing in a semiconductor ETF, it is essential to always check the constituent stocks of that product.

Especially if you want to have a high proportion of SCM (materials, components, equipment) related companies, you must carefully check whether your desired SCM stocks are actually included in that ETF. Rather than simply investing based on the name 'Semiconductor ETF,' it is important to select a product that aligns with your investment goals by checking the internal constituent stocks.

Although there is a lot of short-term market noise and various criticisms currently, if the stock price enters an absolutely low price range when judged by corporate earnings, it should be treated as a buying opportunity. It is important to make investment decisions based on the company's intrinsic value and earning power, without being swayed by short-term market volatility or negative sentiment.

The expert urged investors not to sell out of fear when the stock price falls excessively relative to corporate earnings, entering an absolutely undervalued range. Instead, such a time can be an opportunity to build a portfolio from a long-term perspective through staged buying. The emphasis is on an investment strategy that prioritizes the company's long-term growth and earnings outlook over short-term market conditions.