SK Hynix shares plunged 14.65% to 1.55 million won on July 28, one day before the company's Q2 earnings announcement. The decline followed reports that a Chinese state-backed company developed domestic deep ultraviolet (DUV) lithography equipment, triggering investor concern across semiconductor stocks. Analysts characterized the selloff as excessive given SK Hynix's anticipated Q2 results, with consensus estimates projecting operating profit of 63.9868 trillion won.
Chinese DUV Development Triggers Semiconductor Stock Decline
According to The Information, a Shanghai-based state-backed Chinese company successfully mass-produced domestically developed immersion DUV lithography equipment. The company plans to supply 5 units this year and 20 units next year to Chinese customers including SMIC, CXMT, and Hua Hong Semiconductor. The news impacted US semiconductor stocks, subsequently affecting SK Hynix investor sentiment in the Korean market. SK Hynix last traded at the 1.55 million won level in early May.
Analysts Characterize Decline as Oversold
Han Ji-young, researcher at Kiwoom Securities, stated: "While news of China's DUV lithography equipment development appears to have worsened investor sentiment, the domestic stock market's overall immunity has weakened significantly. The current plunge is quite excessive, and considering fundamentals, we judge this to be an oversold zone."
Q2 Earnings Consensus Projects 594% Year-Over-Year Operating Profit Growth
According to the financial investment industry, SK Hynix's Q2 consensus stands at revenue of 83.9391 trillion won and operating profit of 63.9868 trillion won. These figures represent increases of 277% and 594% respectively compared to the same period last year. The Q2 operating profit forecast exceeds the company's full-year 2023 operating profit (47.2 trillion won) by approximately 17 trillion won. Combined with Q1 results (37.6102 trillion won), first-half operating profit is projected to exceed 100 trillion won.
Securities firms estimate SK Hynix recorded an operating profit margin of 75-77% in Q2, slightly higher than the previous quarter's 72%. According to market research firm TrendForce, general-purpose DRAM prices rose 58-63% quarter-over-quarter in Q2, while NAND prices increased 55-60%.
Son In-jun, researcher at Eugene Investment & Securities, explained: "Strong CPU demand, Vera Rubin ramp-up, and high-end smartphone manufacturers' competition to secure volume have combined to intensify memory shortage. Long-term supply agreements (LTA) with binding force are expanding, maintaining high long-term earnings visibility."
Kioxia Investment Recovery Contributes to Q2 Results
SK Hynix completed the sale of SPC1 in June as part of its strategic investment recovery from Kioxia. Kim Sun-woo, researcher at Meritz Securities, estimated: "Of the 3.9 trillion won SK Hynix strategically invested in Bain and Kioxia, the company completed the SPC1 sale in June. In that process, cumulative profits approaching 40 trillion won would have been recognized." Kim added: "SK Hynix still holds SPC2 (convertible bonds), which can be converted to a 14% equity stake."
SK Hynix participated as a strategic investor in Bain Capital's consortium acquisition of Kioxia in 2018 through a special purpose company (SPC). Following Kioxia's 2024 Tokyo Stock Exchange listing, the stock surged amid AI demand, enabling Bain to complete the investment recovery with substantial gains.
FAQ
What caused SK Hynix stocks to fall 14.65% on July 28?
SK Hynix shares declined following reports that a Chinese state-backed company successfully mass-produced domestically developed immersion DUV lithography equipment, raising concerns about narrowing technology gaps in semiconductor manufacturing.
What are analysts' Q2 earnings projections for SK Hynix?
Consensus estimates project Q2 revenue of 83.9391 trillion won and operating profit of 63.9868 trillion won, representing year-over-year increases of 277% and 594% respectively. The Q2 operating profit forecast exceeds the company's full-year 2023 operating profit by approximately 17 trillion won.
