Korea's semiconductor equipment stocks fly high on memory boom

The household memory makers are not the sole winners in South Korea from the anticipated revival of a chip super cycle as dire shortage of memory is expected to feed a boom bout longer this round and spill benefits across the value chain.

Shares of Wonik IPS Co, a Kosdaq-listed semiconductor processing equipments manufacturer, have jumped 22 percent over the recent three months. Hanmi Semiconductor Co. also engaged in the semiconductor equipment business gained by a whopping 76 percent in stock prices over the same period. Stocks of other semiconductor equipment makers including Zeus Co. and Union Semiconductor Equipment Co. are on an upward spiral.

The global chip shortage is expected to keep semiconductor equipment suppliers busy as chipmakers would have to ramp up facilities to meet the explosive demand from the accelerated digital transition.

The rebound in the chip demand led by data center expansions and rush of orders from mobile device and PC makers has been fueling Korea’s chip exports. Last month, chip shipments gained 13 percent on year to $8.3 billion after gaining for eight months. The benchmark Philadelphia Semiconductor Index on Monday rose 3.31 percent to end at 3,169.11.

Google has a plan of adding cloud data centers in Qatar, Spain, and France this year, while Chinese firms are expanding investment in data centers under Beijing’s infrastructure initiative, said Doh Hyun-woo, an analyst at NH Investment & Securities.

PC chip demand is also on the rise with global tech giants scheduled to release new models amid increased remote working.

Market watchers project memory chip giants to keep up record capex through next year.

Demand against lacking supply has fanned price growth. NH Investment & Securities forecast DRAM spot prices to jump 13 percent in the second quarter.

Investors are chasing stocks as they expect stronger earnings from semiconductor equipment makers, said Nah Sung-joon of Shinhan Investment.

Wonik IPS for one is projected to deliver 238.2 billion won ($212 million) in operating income this year, up 70 percent from last year.

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