Kim Sun-woo, a semiconductor analyst at Meritz Securities, discussed the ongoing semiconductor supercycle in an interview on the 8th at the company's headquarters in Yeongdeungpo-gu, Seoul. The interview followed Samsung Electronics' announcement of 89.4 trillion won in Q2 operating profit, which exceeded market expectations and came within 1 trillion won of Meritz Securities' forecast of 90.1 trillion won announced on the 6th. Kim attributed the sustained supercycle to a fundamental shift in memory demand from business-to-consumer (B2C) to business-to-business (B2B) transactions, driven by big tech companies' race to achieve artificial general intelligence (AGI).
Meritz Securities Forecasts Samsung Q2 Operating Profit Within 1 Trillion Won
Meritz Securities announced a forecast of 90.1 trillion won for Samsung Electronics' Q2 operating profit on the 6th. Samsung Electronics reported actual Q2 operating profit of 89.4 trillion won, resulting in a difference of less than 1 trillion won. Kim Sun-woo is recognized in the industry as an analyst who identifies semiconductor industry turning points early, having warned of the D-RAM industry downcycle in 2018 when the market still expected a boom, and proposing SK Hynix's American Depositary Receipt (ADR) listing necessity in November last year.
Memory Demand Shifts from Consumer to Enterprise Markets
Kim diagnosed this semiconductor cycle as having a completely different structure from the past. "In the past, D-RAM demand occurred when individuals consumed smartphones and PCs, but now it's an era where AI model performance improves according to resource input," Kim stated. He explained that the demand center for memory is moving from B2C to B2B transactions. "Now it's an era where big tech companies preemptively invest in computing resources and AI infrastructure to reach AGI first," he said.
Big Tech AGI Competition to Sustain Supercycle for 2-3 Years
Kim assessed that this supercycle will not end with demand reduction as in the past. "The cycle will end the moment a company stops investing saying they'll 'give up on first place' in the competition," Kim said, adding "At that time, new semiconductor orders will decrease like a cliff." He predicted that timing is still far off, estimating it at 2-3 years away at the earliest. "The AI competition is a first-come-first-served game, so companies have no choice but to continue massive investments to implement AGI before others," he explained.
SK Hynix ADR Listing Proposed as Valuation Catalyst
Kim explained that the SK Hynix ADR listing necessity he raised last year is in the same context. "SK Hynix has superior profitability and technology compared to Micron, but has been undervalued due to low accessibility to US investors," he emphasized, stating "ADR listing is the starting point for being evaluated at appropriate value in the global market." He added, "If Hynix is re-evaluated, Samsung Electronics can also benefit from valuation re-evaluation." This means Samsung Electronics can gain stock price support together in the flow of SK Hynix's re-evaluation, as Samsung Electronics has an advantage in price negotiation power over competitors.
AI Datacenters Identified as National Security Assets
Kim diagnosed that the core of national competitiveness in the AI era is also moving from semiconductors to AI datacenters (AIDC). "In the future, AI datacenters themselves will become national security assets," Kim said, adding "If we attract US big tech's AI factories and intelligence production bases to Korea, that itself becomes a strategic asset that must be protected."
South Korea Maintains Technology Lead Over Chinese Memory Competitors
Regarding the pursuit by Chinese memory companies, Kim evaluated, "China's development speed is fast, but Korea's technology development speed is faster," stating "A significant technology gap is still maintained in advanced memory processes." He advised individual investors, "As profit estimates are being revised upward and memory prices continue to rise, the big flow of semiconductors is positive," but also suggested "If you've reached your target return rate, it's desirable to also adjust your position proportionally."
FAQ
Q: Why does Kim Sun-woo predict the semiconductor supercycle will last 2-3 more years?
A: Kim stated the supercycle will continue because big tech companies are engaged in a first-come-first-served competition to achieve AGI, requiring continuous massive investments in computing resources and AI infrastructure. He explained the cycle will end only when a company announces it will give up on first place and stops investing, a timing he estimates at 2-3 years away at the earliest.
Q: What did Meritz Securities forecast for Samsung Electronics' Q2 operating profit?
A: Meritz Securities announced a forecast of 90.1 trillion won for Samsung Electronics' Q2 operating profit on the 6th. Samsung Electronics reported actual Q2 operating profit of 89.4 trillion won, resulting in a difference of less than 1 trillion won between the forecast and actual results.
