Are Samsung Shares Finding Their Feet?
By Kim Yoo-chul
Staff Reporter
Shares in Samsung Electronics are expected to gain additional momentum on signs of a recovery in the prices of memory chips and liquid crystal displays (LCD), as well as impressive moves in its handsets business, analysts say.
"The global market share of Samsung's memory chips and LCDs has steadily been increasing. Rising shipments of Samsung's NAND flash chips and stable DRAM chips will lift the electronics giant," Ahn Sung-ho, an analyst at KB Investment said.
"Consolidation moves in the global memory chip industry triggered by struggling Taiwanese chipmakers is good news and could steadily boost the benchmark chip prices," he added.
Samsung stock rose to a record high in almost nine months to close at 594,000 won on the nation's main bourse, Monday, according to the Korea Exchange (KRX).
Following hefty production cutbacks by leading producers amid the prolonged downturn in chips and LCD markets, the segments are bottoming and could see a supply shortage in the latter half of the year, according to market research firms and analysts.
"Cutbacks in DRAM and NAND flash memory production are resulting in higher prices for some memory chips," electronics components research firm DRAMeXchange said.
The memory chip sector has been mired in its worst-ever downturn for the last two years, with all leading players including Samsung reporting heavy losses on their operations due to a large oversupply and meager demand for consumer gadgets.
Now, the world's biggest producer of chips and LCD panels is planning to ask its major clients to pay more to buy the components.
"Spring has come to the global memory market. Inventories are clearing thanks to steady cutbacks," said Kim Gee-soo, an analyst at Goodmorning Shinhan Securities, adding the local brokerage has recently raised its target price for Samsung to 720,000 won.
By riding the moves, Samsung has been shifting its DRAM chip lines to more profitable NAND lines as the price upturn of the benchmark chips is higher than DRAM chips.
DRAMs are used in traditional PCs, while NAND flash memories go into high-end portable devices, such as MP3 players, car navigation systems and digital cameras.
"Operating losses of Samsung Electronics will be reduced, significantly. The flat-screen industry was seeing tight supply capitalizing on small-sized panels used in notebooks," Lee Sung-june, an analyst at SK Securities said.
In handsets, Samsung's broad strategy in propelling its touchscreen phones by strengthening ties with telecommunication distributors such as Sprint Nextel Corp. has been paying off, according to the observers.
Samsung, which trails the industry leader Nokia, is set to sell over 200 million phones this year on the back of a "dual strategy" ― low-end phones in emerging markets and high-end phones in developed arenas.