KB Securities initiated coverage on five South Korean semiconductor materials, components, and equipment companies on May 7, issuing a 12-month 'positive' investment opinion on the sector. Analyst Lee Chang-min projected the combined operating profit of PS KEI, DB HiTek, HPSP, PS KEI Holdings, and TCK to grow at a compound annual growth rate of 37% from 2025 to 2028. The bullish outlook stems from AI infrastructure investment driving a structural transformation in semiconductor industry demand, as AI servers and data centers replace traditional IT devices like PCs and smartphones as the primary demand drivers for equipment, materials, and components suppliers.
KB Securities Projects 37% CAGR Operating Profit Growth Through 2028
KB Securities initiated coverage on PS KEI, DB HiTek, HPSP, PS KEI Holdings, and TCK with a 12-month 'positive' sector outlook on May 7. The firm estimated the five companies' combined operating profit will grow at a 37% compound annual growth rate from 2025 through 2028. Analyst Lee Chang-min attributed the projected growth to AI server and data center investment expansion triggering a long-term semiconductor equipment installation cycle.
AI Infrastructure Investment Triggers Structural Supercycle in Semiconductor Sector
Lee Chang-min assessed that the semiconductor industry entered an AI-centered structural supercycle beyond a simple cyclical rebound. The spread of generative AI followed by the rise of agentic AI transformed processing architecture, where a single user request now undergoes multiple stages of reasoning, verification, and execution. KB Securities explained that even with the same user base, the volume of computations increased exponentially, simultaneously expanding demand across GPU, HBM, high-performance DRAM, and enterprise SSD products.
Supply Constraints to Sustain Industry Upcycle Through 2028
KB Securities identified supply constraints as a key factor supporting the industry outlook, noting that supply growth lags rapidly increasing demand. The firm cited leading-edge process investment burdens and production constraints for high-difficulty products like HBM as limiting factors for supply expansion. KB Securities projected that supply shortage-based industry conditions will persist at least through 2028. The report highlighted big tech data center investment competition as a core variable for semiconductor demand, estimating that Meta, Amazon, Microsoft, Google, and Oracle will maintain an average capital intensity of 43% in 2026, meaning these cloud service providers will reinvest over 40% of revenue into AI data centers and computing infrastructure.
Memory Demand Base Expands Beyond AI Servers to General Server Replacement
KB Securities analyzed that the memory demand base is broadening beyond AI server growth. The firm projected that general server replacement demand will begin in earnest in 2026, further expanding the DRAM demand foundation. KB Securities stated that memory consumption structure is spreading from 'AI server-centered' to 'entire server market,' and estimated that general-purpose DRAM average selling price could rise 100% due to supply constraints creating tight supply-demand conditions.
NAND Market Transitions from Storage Recovery to Structural Shift
KB Securities assessed that the NAND market entered a structural transformation phase rather than simple storage device demand recovery. The firm explained that generative AI and agentic AI proliferation rapidly increased the scale of data requiring processing during inference, and the introduction of long-term storage-based memory concepts shifted data storage from one-time to cumulative structure. KB Securities projected that NAND demand will shift from PC and mobile focus to data center and AI infrastructure focus, with high-performance enterprise SSD demand expansion becoming prominent.
Valuation Re-Rating Expected as Memory Expansion Cycle Begins in 2027-2028
KB Securities projected that these trends could lead to valuation re-rating for domestic semiconductor materials, components, and equipment companies. The firm stated that as the memory expansion cycle begins in earnest around 2027-2028, investment expansion will appear across the entire value chain including front-end and back-end processes. KB Securities judged that small and medium-sized materials, components, and equipment companies' importance could be further highlighted given their relatively large earnings leverage effect from investment cycles.
KB Securities Names PS KEI and TCK as Top Picks
KB Securities presented PS KEI and TCK as top picks. The firm projected that PS KEI will absorb benefits from the prolonged front-end process investment cycle based on diversified global customers across all application areas. For TCK, KB Securities anticipated high growth in SiC focus ring performance driven by NAND investment expansion and higher layer counts, plus increased shipments for DRAM and foundry applications. Analyst Lee Chang-min stated that semiconductor materials, components, and equipment companies will enjoy benefits from a longer and stronger expansion cycle than ever before, adding that long-term strong performance flow is expected from this 'promised boom.'
FAQ
What did KB Securities announce on May 7 regarding semiconductor stocks?
KB Securities initiated coverage on five South Korean semiconductor materials, components, and equipment companies on May 7, issuing a 12-month 'positive' investment opinion. Analyst Lee Chang-min projected the combined operating profit of PS KEI, DB HiTek, HPSP, PS KEI Holdings, and TCK to grow at a 37% compound annual growth rate from 2025 to 2028.
Why does KB Securities expect semiconductor materials and components companies to grow?
KB Securities attributed the growth outlook to AI infrastructure investment driving structural industry transformation. The firm explained that AI servers and data centers replaced traditional IT devices as primary demand drivers, while supply constraints and big tech capital intensity of 43% in 2026 will sustain tight supply-demand conditions through at least 2028.
Which companies did KB Securities select as top picks in the semiconductor sector?
KB Securities named PS KEI and TCK as top picks. The firm projected PS KEI will benefit from prolonged front-end process investment cycles with diversified global customers, while TCK is expected to achieve high growth in SiC focus ring performance from NAND investment expansion and increased DRAM and foundry shipments.
