Kim Dong-won, KB Securities Research Head, stated on May 28 that the recent semiconductor stock decline stems from investor sentiment issues rather than fundamental industry problems, maintaining his semiconductor bull market thesis. Kim, who originally forecasted KOSPI 7,500 when Samsung Electronics traded at the 50,000 KRW level, explained that despite deeper-than-expected market corrections in the second half, core drivers including AI investment expansion and memory supply shortages remain unchanged. He attributed the recent sharp decline to simultaneous emergence of multiple negative factors - US interest rate hike concerns, Middle East geopolitical instability, and CXMT expansion plans - which amplified concerns beyond actual industry conditions in an already weakened sentiment environment.
Kim Identifies Three Immediate Market Triggers
Kim identified three factors that triggered the recent decline: US interest rate hike concerns, geopolitical instability in the Middle East, and CXMT expansion plans. He stated that "Samsung Electronics and SK Hynix's second-half and next-year earnings forecasts have not changed," adding that "if DRAM price increases slow but the upward trend continues and demand does not decrease, there is no reason to lower profit estimates." Kim emphasized that while the market experienced what he described as the cruising phase of an airplane from late last year through early June, the next six months may encounter turbulence multiple times, though the overall upward trajectory framework remains intact.
Leverage Liquidation Amplified Decline Beyond Typical Correction Range
Kim attributed the correction exceeding 30% from peak - beyond the typical 20-25% range in bull markets - to leverage liquidation. He explained that "global fund allocation to memory semiconductors exceeded 80% in early June, showing extreme concentration, and many investments utilized credit," noting that "as stock prices plunged, forced liquidations continued, excessively expanding the decline." Kim estimated that 80-90% of the credit liquidation process has been completed. Regarding single-stock leveraged products recently cited as a volatility cause, he stated "macro uncertainty, global fund semiconductor concentration, and credit liquidation are the core factors," characterizing leveraged products as "a factor that slightly increased the decline, but not the main cause."
CXMT Poses Limited Near-Term Competitive Threat to Korean Chipmakers
Kim assessed the likelihood of CXMT becoming an immediate substantial competitor to Samsung Electronics and SK Hynix as low. He explained that CXMT focuses on China's domestic smartphone, PC, and consumer electronics markets, while Korean companies supply high-performance memory to global big tech AI data centers. Kim stated "if big tech invests 100 trillion KRW in AI data centers, approximately 30 trillion KRW goes to memory," adding that "because data center performance determines AI competitiveness, they will not use unverified memory simply because the product is 30% cheaper." He noted, however, that CXMT's plan to expand production capacity by 40% annually based on secured funding warrants monitoring of its technology roadmap beyond three years.
Current Memory Cycle Differs Structurally from Past 2-Year Patterns
Kim emphasized that the current memory boom differs from past 2-year cycle patterns. He explained that while 70% of memory demand previously came from consumer products like PCs and smartphones that are sensitive to economic changes, the structure will flip starting next year with server and data center demand comprising 70%. Kim stated "currently, even if customers order 100 memory units, the actual supply received falls short of 60 units," explaining that "investment to increase production capacity takes approximately two years to translate into actual supply, making significant supply increases difficult until late 2027." Unlike past server boom periods, big tech companies have signed 3-5 year long-term supply contracts, which Kim noted reduces the possibility of sudden order cancellations. He explained "in 2017-2018, contract periods were about six months, allowing cancellation with penalty payments, but now contract periods are much longer," adding that "once a contract is canceled, credit risk must be accepted as it becomes difficult to secure supply again when shortages occur."
Big Tech Treats AI Investment as Survival Issue Rather Than Discretionary Spending
Kim characterized AI equipment investment not as temporary excess investment but as a survival matter for big tech companies. He stated "big tech views AI under-investment as more dangerous than over-investment," explaining that "because they perceive AI as digital infrastructure like railroads, it will be difficult to halt investment even if cash flow deteriorates." Kim noted, however, that the increased interest rate sensitivity resulting from financing a significant portion of AI investment funds through external borrowing represents a key variable for the second-half market.
Interest Rate Sensitivity Emerges as Key Second-Half Variable
Kim cited interest rate sensitivity as a core second-half market variable. He stated "the market is pricing in a high probability of US interest rate hikes in September," adding that "even if the Federal Reserve does not raise rates and only maintains them, the market could experience relief comparable to a rate cut."
Kim Maintains KOSPI Range of 6,000-8,200 for Second Half
Kim presented a second-half KOSPI expected range of 6,000-8,200 and maintained his long-term forecast of 10,500. When asked to choose between Samsung Electronics and SK Hynix, he responded "hold half and half." He explained that SK Hynix shows greater earnings and stock price elasticity according to memory industry conditions, while Samsung Electronics is relatively stable with diversified businesses including mobile and foundry. Kim forecasted "the start of this market was semiconductors, and the end will also be semiconductors," recommending "in the current high-volatility correction phase, a strategy of compressing portfolios centered on AI infrastructure leading stocks like memory semiconductors, power equipment, and substrates to find low-price buying opportunities will be effective."
FAQ
What caused the recent semiconductor stock decline according to Kim Dong-won?
Kim Dong-won attributed the recent decline to investor sentiment issues rather than fundamental industry problems. He identified three immediate triggers: US interest rate hike concerns, Middle East geopolitical instability, and CXMT expansion plans. Kim stated these factors amplified concerns beyond actual industry conditions in an already weakened sentiment environment, with leverage liquidation forcing the correction beyond the typical 20-25% range to over 30% from peak.
Why does Kim Dong-won maintain his semiconductor bull market thesis despite the recent decline?
Kim maintains his thesis because core fundamental drivers remain unchanged. He stated that Samsung Electronics and SK Hynix's second-half and next-year earnings forecasts have not changed, and that AI investment expansion and memory supply shortages continue to support the market. Kim emphasized that the current memory cycle differs structurally from past 2-year patterns, with server and data center demand set to comprise 70% of total demand starting next year, and supply constraints expected to persist until late 2027.
