[NEWS IN FOCUS] Chipmaker stocks hit new high as demand expected to shoot up

Samsung's office in Seocho District, southern Seoul, on Dec. 2. [NEWS1]

Korean chipmakers Samsung Electronics and SK hynix both hit record highs on the Kospi market on Wednesday as demand for semiconductor products — especially dynamic-random access memory (DRAM) — is expected to continue to rise next year.

The solid demand will push up prices of chips further, potentially in the first half when the overall global supply of memory chips could be limited following a power outage at Micron’s plant in Taiwan earlier this month.

Samsung Electronics, the world’s largest memory chip maker, hit a new high to close at 73,900 won ($68) on Wednesday, up 3.07 percent from the previous day.

SK hynix, the second largest memory chip producer, also hit a new all-time high, gaining 4.78 percent to close at 120,500 won.

Analysts are betting that the two companies won’t stop there, raising target prices to the 90,000 won level for Samsung and 160,000 won for SK hynix.

“The upturn in demand is already taking shape in the fourth quarter, and shipments of DRAM will be higher than initially expected by a large margin,” said Park Yu-ak, an analyst at Kiwoom Securities.

“DRAM prices will start to jump in the first quarter next year, earlier than the previous projection of the second quarter,” said the analyst who upgraded Samsung’s target price to 90,000 won from 75,000 won.

The share prices of the two companies have been on a tear in recent weeks, buoyed by a better-than-expected shipment record as well as a rosy future outlook.

A recent power outage from rival Micron on Dec. 3 will contribute to moving memory chip prices upward in the first quarter because the wafers affected by the glitch will be scrapped.

The facility accounts for roughly 9 percent of global DRAM supply, that's about 100,000 wafers per month, according to Kim Yang-jae, an analyst at KTB Investment & Securities.

“The accident will affect the supply trend of DRAM and increase DRAM’s spot price,” Kim said, “Chip clients will likely diversify their supply source to include Korea, Japan and China if they are too dependent on Taiwanese manufacturing sites.”

The analyst added that there has been further evidence of Taiwan having an unstable power supply recently.

Korean chipmakers will keep on benefiting from a surge in demand for memory chips used in data centers and a wide range of electronic devices like PCs and tablets.

“While it is likely that corporate clients will move to stack up their server DRAM and solid state drives [SSDs], the suppliers’ investment [to expand the supply of memory chips] has been limited, which will dramatically increase memory chip prices after the second quarter of next year,” said Eo Kyu-jin, an analyst at DB Financial Investment.

Eo revised up SK hynix’s target price to 150,000 won.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]