Shares of South Korean chip equipment, back-end and materials makers surged on the 21st, following gains at Samsung Electronics (005930) and SK hynix (000660) that were driven by last week's strength in U.S. semiconductor stocks. Expectations that larger capital spending by major chipmakers will feed through to earnings at equipment and back-end companies appear to be broadening buying interest.
Hana Micron (067310), an outsourced semiconductor assembly and test company, was trading above 44,000 won at around 1:30 p.m. on the 21st, up more than 14% from the previous session, according to the Korea Exchange. SFA Semicon (036540) jumped more than 20% and Signetics (033170) rose to its daily limit. Apack (200470) also gained more than 10%, with back-end firms handling packaging and testing rising across the board.
Buying also spread to equipment makers. YC (232140), which makes chip test equipment, traded above 13,900 won, up more than 17%, and New Power Plasma (144960) rose more than 14%. DI (003160) gained about 14% and Wonik IPS (240810) rose about 5%. TEMC (425040), a specialty gas supplier for chipmaking, climbed more than 20%, bringing materials stocks into the rally.
Large-cap chipmakers set the tone first. Samsung Electronics rose 5.17% to 274,500 won, while SK hynix gained 1.08% to 1,877,000 won. The KOSPI was up 1.88% and the KOSDAQ 1.00%, with the warmth that began in large-cap chip stocks spreading to suppliers and lifting the broader sector, which led the index higher.
The broad strength in Korean chip stocks is attributed to a recovery in investor sentiment on U.S. markets late last week. With some uncertainty over monetary policy cleared after the Federal Reserve raised its benchmark rate, expectations of higher memory prices came to the fore. Micron rose more than 4% and Nvidia also advanced, while the Philadelphia Semiconductor Index gained close to 3%. Over the prior week, Micron rose 4.2% and Nvidia 1.8%.
Analysts say the investment appeal of chip suppliers is improving as expectations for larger capital spending persist. Chipmakers have continued to add capacity to the point where global front-end equipment makers have reported delivery delays, according to the analysis. Hana Financial Investment said those delays stem from difficulties securing cleanrooms and components rather than weak demand. It also expects DRAM and NAND prices to come in slightly above earlier third-quarter forecasts.
The prospect that capacity expansion will flow from equipment orders to demand for back-end services, materials and components in turn is also adding to gains in supplier stocks. Over the past week, Wonik IPS rose 10.2% and Hana Micron 12.4%, while back-end firm Nepes gained 19.2%, indicating that expectations of an industry recovery have already spread to related names. "We believe the investment case remains valid for both front-end and back-end companies," said Kim Rok-ho, an analyst at Hana Financial Investment.
