Hana Securities researcher Kim Du-eon stated in a May 27 report that the key question for Korea's Q3 stock market is not the size of Q2 profits but how long those profits can be sustained. Foreign investors net purchased 2.3 trillion won last week as artificial intelligence investment raises corporate profit expectations amid geopolitical tensions and interest rate pressures that elevate stock discount rates. Kim emphasized that when big tech investments translate into orders, long-term contracts enhance cash flow visibility, and memory companies protect both pricing and ecosystem health, Korean semiconductor valuation discounts will narrow. The report comes as domestic and international markets enter earnings season, with KOSPI stabilizing after foreign selling subsided and supply-demand dynamics began shifting direction.
Micron SCA Contracts Bind Volume and Cash Flow Floors
Kim identified long-term contracts as the first change to confirm in domestic memory company earnings. He explained that while Samsung Electronics and SK Hynix Long-Term Agreements (LTA) details remain undisclosed, Micron's Strategic Customer Commitment (SCA) contracts more clearly show the strategic direction. "If existing LTAs extended transaction periods, SCAs bind the floor of volume and cash flow," Kim stated. "Memory sector revaluation begins when the profit floor rises rather than when the price ceiling increases."
SK Chairman Choi Emphasizes Supply Expansion to Prevent Chipflation
Kim analyzed SK Group Chairman Choi Tae-won's pricing comments from a sustainability perspective rather than a demand slowdown angle. "Chairman Choi assessed current memory prices as abnormal levels and emphasized the need to expand supply to grow the market together even if margins decline somewhat," Kim noted. "This is a strategy to prevent chipflation from damaging PC and smartphone demand or allowing new competitors to enter." Kim added that SK Hynix forecasts 2027 as potentially the most severe supply shortage year in history, with customer demand likely exceeding production capacity until after 2030 even with aggressive capacity expansion. "Rather than maximizing peak profits, the company aims to extend profit lifespan through supply expansion," he said.
AI Summit Announces $950 Billion in Partnerships
The San Francisco AI Summit expanded this trend to the industry level with announced partnerships totaling $950 billion. SK Group-related partnerships account for $750 billion, including $500 billion in next-generation memory and datacenter cooperation with NVIDIA. Samsung Electronics and Broadcom partnerships reach up to $200 billion. "While we must distinguish confirmed revenue from memorandums of understanding, it is clear that Korean memory companies are moving from simple suppliers to joint investors and design partners," Kim assessed.
Japan Lost 70% DRAM Market Share After 1986 Agreement
Kim cited Japan as a cautionary example. Japanese companies held over 70% of the generic DRAM market around 1990 but saw their share plummet to around 10%. He attributed this not only to the 1986 US-Japan semiconductor agreement and yen appreciation but also to failures in responding to price collapses, PC-centered demand shifts, and Korean companies' large-scale investment and production system transitions. Kim referenced the Gyeongju Choi family's 12-generation practice of limiting wealth accumulation beyond a certain threshold, explaining, "They did not limit wealth itself but preserved relationships that allowed wealth to continue. Memory companies' coexistence strategies follow the same principle." He emphasized, "Excessive pricing raises profits for one quarter, but appropriate pricing and stable supply grow the entire market."
FAQ
What did Hana Securities say about Korea's Q3 stock market focus on May 27?
Hana Securities researcher Kim Du-eon stated in a May 27 report that the key question for Korea's Q3 stock market is not Q2 profit size but profit sustainability. He emphasized that Korean semiconductor valuation discounts narrow when big tech investments become orders, long-term contracts enhance cash flow visibility, and memory companies protect both pricing and ecosystem health.
How do Micron SCA contracts differ from Samsung and SK Hynix LTA agreements?
Kim Du-eon explained that while Samsung Electronics and SK Hynix Long-Term Agreements extended transaction periods, Micron's Strategic Customer Commitment contracts bind the floor of volume and cash flow. He stated that memory sector revaluation begins when the profit floor rises rather than when the price ceiling increases.
What partnerships were announced at the San Francisco AI Summit?
The San Francisco AI Summit announced partnerships totaling $950 billion. SK Group-related partnerships account for $750 billion, including $500 billion in next-generation memory and datacenter cooperation with NVIDIA. Samsung Electronics and Broadcom partnerships reach up to $200 billion.
