Director Yeom Seung-hwan: "Year-End Rally Expected, Market Stabilizes After Midterm Elections"

Director Yeom Seung-hwan predicted that once the US midterm elections conclude, policy uncertainties will be resolved, positively impacting the year-end stock market. He cited past midterm election trends, which generally show market increases regardless of the election outcome. He explained that while the market might stagnate due to policy direction uncertainties before the election, anticipation for new policies will form afterward.

Director Yeom also analyzed that the strong growth rate of US companies' Q2 earnings per share (EPS) indicates robust market fundamentals. He expects this strong corporate performance, coupled with the resolution of post-midterm election uncertainties, to lead to a positive market trend towards the year-end.

Director Yeom Seung-hwan assessed that the technological gap with China in semiconductors is maintained at about three years, and Korean companies will further advance during this period. Citing reports from securities analysts, he emphasized that three years is a significant gap given the speed of technological development.

Director Yeom predicted that while Chinese semiconductor companies are pursuing listings and expansions, this might create a short-term oversupply threat but will struggle to narrow the technology gap. He analyzed that Korean companies will maintain their leadership through continuous research and development.

Director Yeom Seung-hwan pointed out that products primarily manufactured by Chinese semiconductor companies are for smartphones, which are far from the current key market of AI data center semiconductors. He analyzed that high-performance semiconductors used in AI data centers require advanced technology, and it will take considerable time for Chinese companies to gain competitiveness in this area.

Furthermore, he explained that major global markets, including US data centers, strongly exclude Chinese semiconductor components due to security concerns. He foresaw that these security concerns would further hinder Chinese semiconductor companies' global market entry, potentially benefiting Korean companies.

In conclusion, Director Yeom emphasized that the decline in domestic semiconductor stock prices due to the China issue could, in fact, be an opportunity for bargain hunting. Based on the judgment that China's catch-up is unlikely to pose a real threat, he positively evaluated the long-term growth potential of domestic semiconductor companies.

Director Yeom Seung-hwan explained that the US government is strongly regulating the use of Chinese components due to security concerns. He cited the case where Apple received a warning from the US Department of Commerce when it attempted to use Chinese memory, noting that this trend is expanding beyond semiconductors to various sectors like batteries and power equipment. Considering the US government's stance, Director Yeom believes that the use of Chinese memory in the US market is virtually impossible.

Director Yeom Seung-hwan analyzed that the high growth of the data center market would significantly benefit Samsung Electro-Mechanics. He explained that demand for essential components like MLCCs (Multi-Layer Ceramic Capacitors) and FCBGA (Flip Chip Ball Grid Array) substrates, which are crucial for data centers, is skyrocketing. He evaluated Samsung Electro-Mechanics as having high growth potential due to its global market share in both components.

He particularly emphasized that data center MLCCs see about 30 times more demand than those for smartphones, requiring high quality and advanced technology, thus limiting suppliers. He predicted that the expanding supply of FCBGAs for data centers would also significantly contribute to Samsung Electro-Mechanics' performance improvement.

Director Yeom Seung-hwan pointed out that Samsung Electro-Mechanics' current stock price has a valuation burden, advising existing holders to observe rather than new investors to enter. He explained that Samsung Electro-Mechanics' price-to-earnings ratio (PER) is around 50-60 times, which is relatively high compared to Samsung Electronics or SK Hynix, whose PERs are around 5 times.

Therefore, he suggested that investing in semiconductor leaders like Samsung Electronics or SK Hynix might be more rational than short-term trading. While acknowledging Samsung Electro-Mechanics' long-term growth potential, he maintained that a cautious approach is necessary at its current stock price level.

Director Yeom Seung-hwan emphasized that as artificial intelligence (AI) investment expands, its impact is spreading to the power infrastructure and battery markets. He mentioned that Sam Altman identified transistors (semiconductors) and power as the two key bottlenecks for AI, stressing the importance of power supply essential for AI technology development.

He explained that the current aging transmission grid is causing a mismatch in power supply, which is a major obstacle to building AI data centers. As high-performance AI semiconductors demand more power, existing power infrastructure struggles to meet the demand.

Consequently, he analyzed that building in-house power plants within data centers and integrating energy storage systems (ESS) are emerging as new trends. These changes are expected to accelerate the growth of the power infrastructure and battery-related markets, offering new opportunities for relevant companies.

Director Yeom Seung-hwan announced that the Energy Storage System (ESS) market has recently grown rapidly, quickly catching up to the electric vehicle (EV) battery market. He explained that as of the first half of this year, when comparing the global EV battery market size to the ESS market size, ESS had reached 75% of the EV market level.

He predicted that the ESS market could even surpass the EV battery market if this trend continues, emphasizing its enormous future growth potential. He specifically anticipated that the three major domestic battery companies (LG Energy Solution, Samsung SDI, and SK On) would benefit from increased regulations on Chinese products.

Director Yeom Seung-hwan stated that an executive order signed by President Trump includes provisions related to ESS, prohibiting the use of foreign-sourced large-capacity grid equipment supplied by foreign companies. This is largely interpreted as an intention to restrict Chinese ESS products from entering the US market.

This US executive order is expected to exclude Chinese companies and provide greater opportunities for Korean battery companies in the US market. He added that SK On has already shown tangible results, such as recently signing a 1 trillion won ESS supply contract with US-based NeoVolta Power.