Micron ban stimulates foreign investment in semiconductors

Industry

Published: 30 May. 2023, 18:24 Updated: 30 May. 2023, 20:07

Micron ban stimulates foreign investment in semiconductors

[SHUTTERSTOCK]

Foreign investors are buying a record amount of Korean stocks, especially in the semiconductor sector, after China's ban on U.S.-based chipmaker Micron Technology provided Korean chipmakers an opportunity to fill that market gap, despite U.S. discouragement.

Foreign investors have bought 13.2 trillion won ($9.95 billion) worth of Kospi stocks as of Tuesday this year, according to the Korea Exchange. The sum was the highest amount in the same period since the securities exchange operator began compiling data in 1999.

The benchmark index closed at 2,585.52 points on Tuesday, up 1.04 percent from the previous session's close, to hit a 2023-high.

Semiconductor, battery and automobile stocks recorded the most foreign buyers, with Samsung Electronics attracting the highest number. Investors abroad bought 10.3 trillion won worth of Samsung Electronics shares this year as of Tuesday, followed by SK hynix at 1.28 trillion won, Hyundai Motor at 1.22 trillion won, Samsung SDI at 1.01 trillion won, LG Electronics at 608 billion won and Kia at 539 billion won.

Foreign buying power also boosted stock prices, particularly in semiconductor stocks — which were in a post-pandemic downturn in the supercycle — on bargain hunting.

Samsung Electronics closed at 72,300 won Tuesday, up 30.3 percent from the beginning of the year, to reach a 52-week high. It had closed above the 70,000-won mark for the first time in 14 months on Friday.

SK hynix closed at 110,300 won and LG Electronics at 124,900 won on Tuesday, both logging a 12-month high. The chipmaker has jumped 45.7 percent so far this year and the appliance maker by 44.6 percent.

LG Electronics soared 10.8 percent Tuesday on growing expectations for a strong performance in its vehicle components division.

Semiconductor stocks saw a high amount of foreign investment, increasing after Nvidia announced Wednesday strong prospects for the company backed by stronger-than-expected AI chip demand.

Foreign investors bought 868 billion won of SK hynix, the supplier of high-end memory chips for Nvidia’s processors that train ChatGPT in data centers, in three trading sessions following the U.S. chip designer’s announcement and 1.06 trillion won of Samsung Electronics.

The graph above shows the top-ranking net buy by foreign investors in the Kospi market between Jan 2. and Tuesday. [KOREA EXCHANGE]

ISU Petasys, a printed circuit board maker which won orders to supply its boards to Nvidia in January, became the 10th most bought stock by foreign investors in the same period, jumping 33.9 percent since Wednesday.

Overseas markets have been eyeing the stance of chipmakers in Korea following China’s sanctions on Micron on May 21. The Chinese government banned its companies from buying chips from Micron on the grounds that Micron had failed to pass the government’s network security review.

“Korea, a U.S. ally that went through China’s economic coercion firsthand in recent years, should also act against backfilling for Micron,” said U.S. lawmaker Rep. Mike Gallagher in a statement on May 23, advising Samsung Electronics and SK hynix to refrain from taking advantage of Micron’s absence in the Chinese market.

China’s ban on Micron puts Korean chipmakers in a “delicate spot,” Wall Street Journal reported a day after the ban.

“Any American pressure campaign could prove painful to Korea, Samsung and SK hynix, as they have deep exposure in China.”

Chinese media demanded the United States stop urging Korea into taking sides.

“The United States is pushing harder to force its allies like Korea into taking sides by branding China’s justified activity as ‘economic coercion’,” the Chinese Communist Party-owned tabloid Global Times said Monday. “It will be natural to see Korean chip companies fill some of the market gap in China.”

The crux for Korea is to make pragmatic choices or its economic outlook will be extremely worrying, the tabloid warned.

But experts say Micron’s void won’t be too large or that long-lasting.

“Memory chips are not unique from company to company; they are all-purpose products sold without distinction in the market,” said Ahn Ki-hyun, senior executive director at the Korea Semiconductor Industry Association. Such characteristic makes it impossible for a company to hold back its market share at will, according to Ahn.

"Considering the current downturn [in the memory chip sector] and Micron’s market share in China, the gap will not be too big," the senior official added.

“Just like the rise of roundabout exports to Russia due to the Russia-Ukraine War, the Chinese side may opt to buy Korean supplies via a third-party country,” said Jang Sang-sik, head of trend analysis at Korea International Trade Association, hinting at strategic silence as an option for Korean chipmakers.

BY KIM KYUNG-JIN, PARK HAE-LEE AND SOHN DONG-JOO [sohn.dongjoo@joongang.co.kr]