Korea-China Semiconductor Competition: How to Invest?

Kang Kwan-woo, CEO of Dalant Investment, stated that the market's two to three-year cycle is becoming diluted and operating profit next year will grow 45-50% year-over-year, analyzing that the semiconductor top two will earn enormous profits.

As the proportion of long-term supply agreements (LTA) expands and profit visibility improves, maintaining profitability is expected even during a sideways movement in 2028 after a rise in 2026-2027. Operating profit next year is forecasted to grow 45-50% year-over-year.

However, beyond this scale, the possibility of additional shareholder returns has been raised, and there is a possibility that from the second half of 2027 onwards, the character may shift to a high-dividend shareholder return stock.

Expansion of AI adoption rather than HBM price declines will drive market growth, and the possibility of a two-tier pricing structure forming between Samsung Electronics and SK Hynix products exists.

Samsung Electronics shows characteristics of a comprehensive IT company with beta of 1.2-1.3, operating diverse IT businesses, while SK Hynix, with beta of 1.7-2.0, is a pure memory semiconductor company with greater earnings volatility.

During market upswings, SK Hynix will be advantaged, while Samsung Electronics' defensive nature will be advantaged during downturns, as explained by CEO Kang.

Investors can employ a strategy of appropriately allocating the defensive Samsung Electronics and the aggressive SK Hynix considering such stock-specific characteristics and beta differences.

China's CXMT is known to be developing LPDDR6 and HBM3 following DDR4 and DDR5, but actual yield rates remain uncertain.

It is generally believed that CXMT products remain for domestic Chinese use and face difficulty passing qualification certifications from global tech giants. Should Samsung and SK position themselves with high-value products such as HBM3e and HBM4, near-term impact would be limited, but pricing pressure on commodity products like DDR4 could pose a risk factor.

Yangtze Memory Technologies (YMTC) has emerged as a threatening presence, claiming the 3rd-4th spot in NAND market share with a goal of becoming number one. SK Hynix possesses its own X-Stacking technology, and its proprietary technology is of a level that even Samsung Electronics utilizes.

Meanwhile, SK Hynix's Solidigm shows advantages in responding to enterprise SSD workloads. With U.S. restrictions on ASML EUV equipment imports, the long-term technology gap is expected to widen further.

In contrast, the Korean market's PER falls below historical averages, showing relatively higher expected stock returns compared to bonds. Therefore, adjustments to allocation are necessary considering the potential for excess returns in the Korean stock market.

The Nasdaq has high volatility and is difficult to escape from in a high interest rate environment. He recommended structuring an ETF portfolio with 60-70% in the S&P 500 and 30-40% in the Nasdaq.