Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
A 2017 deja vu?
A man enters the Morgan Stanley building in New York in this file photo, while the Goldman Sachs logo is also seen at bottom-left. AP-Yonhap
By Park Jae-hyuk
Morgan Stanley, Goldman Sachs split over future course of Korean chipmakers
By Park Jae-hyuk
Last week, two of the top U.S.-based investment banks ― Morgan Stanley and Goldman Sachs ― published reports showing rather contrasting views for the global semiconductor industry.
Titled “Memory ― Winter is Coming,” Morgan Stanley cut its target on Samsung Electronics ordinary shares (ORDs) to 89,000 won ($76) from 98,000 won as the report warned of a rather tough chip-pricing environment heading into next year.
Despite Samsung Electronics' repeated confidence over the continued tight supply of memory chips, the Morgan Stanley report directly hit investor sentiment as ORDs at Samsung and SK hynix plummeted. It hugely cut its target on SK hynix to 80,000 won from 156,000 won.
Morgan Stanley's abrupt skepticism contradicted its previous week's report that recommended investors stay “overweight,” leading foreign investors to massively unload their holdings in the world's top two memory chipmakers throughout last week.
But unlike Morgan Stanley's stance, which triggered massive unloading of the world's No. 3 memory chipmaker ― Micron Technology ― Goldman Sachs maintained its optimistic targets on Samsung Electronics at 107,000 won and SK hynix at 177,000 won with expectations of a limited decline in global DRAM prices next year.
Their contrasting reports harken back to similar events in 2017.
Industry experts said Sunday that the reports reflect a similar situation four years ago.
In November 2017, Morgan Stanley lowered its target on Samsung Electronics ORDs, claiming prices for NAND-type flash memory chips would go down and the electronics company would not see gains the following year. After the report, Samsung Electronics shares fell 5 percent in a single trading day, knocking off 18 trillion won in market capitalization.
At the time, Goldman Sachs analyst Daiki Takayama refuted Morgan Stanley's view.
“Excessive concerns over the cycle of memory chips in the semiconductor industry were affecting the stock price,” he said in a report. “We see the current price as an attractive opportunity to buy shares. We have found no factors to make a change in our positive recommendation on Samsung Electronics.”
In 2018, both Samsung Electronics and SK hynix posted record-high earnings as Goldman Sachs expected.
Industry experts also regard the recent concern as inaccurate, given that the Korean chipmakers have already signed large-scale contracts to supply memory chips to their clients until the end of the year. This means the long-term fixed prices of DRAMs will remain stable for a while.
“Samsung Electronics, SK hynix, Micron and other major memory producers have limited inventories and production bottlenecks are deepening,” Yuanta Securities analyst Lee Jae-yun said in a report. “The chances are slim for memory chip prices to drop sharply.”
While increased chip price volatility has been cited as one variable factor, inventory levels for Samsung and SK remain tight, said company officials. Plus, demand for premium chips for use in corporate servers and high-end mobile devices will rise until next year, offsetting the effects of the decline in conventional PC DRAM chips.