The global AI market continues to heat up, yet South Korea's two leading memory chip giants have charted distinctly different performance trajectories. On Monday, SK Hynix's stock price surged 12.5%, reaching a record closing high and pushing its market capitalization above 1,000 trillion won for the first time. In contrast, Samsung Electronics saw a gain of approximately 5% on the same day, less than half of its competitor's increase. This divergence is not an isolated event—last month, the performance gap between the two companies exceeded 25 percentage points.
Analysts note that strike threats initiated by Samsung's labor union have become a key variable suppressing its stock price, causing investors to remain cautious about Samsung even as they bet on AI memory demand. A Citigroup analyst team lowered Samsung's target price on April 30, reducing it from 320,000 won to 300,000 won, citing concerns that intensified labor disputes could erode profitability. Meanwhile, Bank of America Securities raised SK Hynix's target price, suggesting in a research report that a potential strike at Samsung could even create a more favorable chip pricing environment for SK Hynix. The unresolved strike threat has prompted cautious assessments from Wall Street. As previously reported, Samsung's union held a rally on April 23, demanding that 15% of the chip division's operating profit be allocated to employees and threatening an 18-day strike starting May 21. The union had already rejected management's proposal, which included allocating 10% of operating profit to a bonus pool and a 6.2% wage increase. Samsung's Chief Financial Officer Park Soon-cheol stated during an earnings call last week that the company is addressing labor issues in accordance with laws and regulations and will prioritize dialogue to seek a proper resolution. He added that even if a strike occurs, the company would minimize production disruptions through specialized teams and contingency measures within legal frameworks. Stanley Tang, a senior fund manager at Sumitomo Mitsui DS Asset Management, commented, "The market remains optimistic about AI-driven demand for high-bandwidth memory, but there are concerns about Samsung's potential strike." He pointed out that while MediaTek and ASE Technology Holding saw their stock prices rise nearly 10%, "only Samsung is underperforming the broader market." The shadow of labor disputes, combined with Samsung's competitive disadvantage in the high-bandwidth memory (HBM) sector, complicates its position. SK Hynix established a leading position in the lucrative HBM chip market last year, while Samsung remains in catch-up mode. The current strike threat adds further uncertainty to its recovery efforts. In lowering the target price, a Citigroup team led by analyst Peter Lee noted that although they view Samsung as a beneficiary of long-term growth in the memory market, "increased provisions related to bonuses due to labor disputes" could erode profits. The team reduced its operating profit forecasts for Samsung by 10% and 11% for this year and next, respectively. Lee stated in the report, "We maintain a conservative stance on short-term earnings visibility." In contrast, SK Hynix reached an agreement with its union last September, committing 10% of annual operating profit to a bonus pool, successfully averting strike risks and setting a precedent for South Korea's tech industry. Bank of America Securities analyst Simon Woo wrote in a report that they assume Samsung will begin setting aside provisions for special employee bonuses in the second quarter, and a potential strike at Samsung could further improve SK Hynix's chip pricing environment. Citigroup suggested that if labor tensions at Samsung continue to escalate, short-term cost pressures will persistently weigh on its profitability, risking a further widening of the valuation gap between the two companies. Strong Fundamentals Overshadowed by Concerns It is worth noting that Samsung's fundamentals are not weak. Its semiconductor division recorded historic profits in the first quarter of this year, with operating profit surging 48-fold year-on-year, driven by AI data center orders and exceeding market expectations. Citigroup indicated that the strong momentum of the memory cycle aligns with market consensus, and memory supply shortages are expected to intensify further by 2027, leaving medium- to long-term fundamentals intact. However, robust performance has not fully offset the valuation discount caused by labor risks. While the AI boom has driven peers to new highs, Samsung's relative underperformance reflects market doubts about its ability to smoothly navigate internal challenges. For investors, whether Samsung can resolve labor conflicts before the May 21 strike deadline will be a critical factor in determining if it can catch up with SK Hynix.
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