South Korea's two leading memory chip makers are facing another inventory warning, according to a fresh report from brokerage firm KB Securities. The research highlights that both SK hynix and Samsung Electronics have seen their memory stockpiles fall to under ten days, with the market potentially heading toward an "unprecedented shortage" by 2027. The report identifies both companies as top picks in the semiconductor sector, noting their shares have entered undervalued territory after recent corrections.
KB Securities argues that the recent share price declines for SK hynix and Samsung Electronics have been excessive. Over the past three months, the two stocks have dropped 38% from their peaks, bringing their forward price-to-earnings ratios based on next year's earnings down to around 3 times. Kim Dong-won, head of research at KB Securities, stated: "We expect Samsung Electronics and SK hynix to post record earnings for three consecutive years, and large-scale shareholder return policies will also continue. Given that the current share prices are severely undervalued, a strong re-rating is anticipated, which is why we have named these two companies as top picks in the semiconductor industry."
Kim Dong-won also issued a warning: "As of the third quarter, the memory inventories of Samsung Electronics and SK hynix have fallen below ten days. This is no longer just a case of demand recovery, but a situation where 'sellable inventory could be completely exhausted'."
The KB Securities report projects that memory's share of total AI infrastructure investment will rise from 14% in 2025 to 40% in 2026, and further to 57% by 2027—a more than fourfold increase within two years. Global semiconductor research firm TrendForce offers a similar forecast, estimating that memory will account for 68% of AI infrastructure investment by 2027.
KB Securities also points out that global hyperscale data center companies have significantly raised their AI infrastructure capital expenditure for next year to $1.3 trillion, a sharp 60% increase from the previous year. Driven by robust AI infrastructure demand, the memory market is expected to enter an unprecedented phase of supply shortage.
The brokerage identifies the "shift to HBM4 production crowding out general-purpose DRAM capacity" as a key factor behind the memory supply shortage. The report notes that HBM4 mass production consumes three times the wafer capacity of conventional DRAM, severely impacting supply given limited wafer production lines. KB Securities further estimates that DRAM and NAND bit demand will outpace supply by more than 10 percentage points next year.
Comments