Samsung Has Substantial Upside Potential on Strong Fundamentals: Report

Investor sentiment has been unduly negative toward Samsung Electronics in light of the company’s strong performance and strong earnings forecast, a chief analyst at a local research firm said.

“I think investor concerns are overdone. Limited supply will underpin memory chip prices in the coming months,” Greg Roh, director of HMC’s Securities and Investment Research Center in Seoul, said during a recent interview. with Yonhap News Agency.

Roh is one of the country’s leading semiconductor analysts.

“DRAM bit growth is forecast to be in the low to mid-teens early next year, so prices will stabilize or even rise amid supply constraints, even if a recession,” he said.

Bit growth refers to the amount of memory produced, which is key to measuring overall demand.

Global supply problems and parts shortages are making major DRAM companies including Samsung, SK hynix and Micron wait much longer for semiconductor equipment and hampering chip supply, he said.

Shares of Samsung have fallen nearly 25 percent this year, versus the broader market’s loss of about 22 percent, and continued to hit new 52-week lows in recent weeks.

Still, investors are bracing for further losses ahead, with dovish views prevailing for tech stocks in particular as macro uncertainties such as high inflation, the war in Ukraine and supply issues led to investors to dump value stocks and seek safer assets.

“It’s not the company’s earnings, but negative investor sentiment that is dragging down Samsung’s share prices,” he said.

Adding to the concerns is widespread fear in the market that the chip cycle could turn negative any time soon.

While those uncertainties are clouding the overall market outlook, Samsung has strong fundamentals and capabilities to drive technological advances and deliver innovations, Roh said.

The South Korean tech giant is expected to announce the start of mass production of 3-nanometer chips possibly as early as next week, as the world’s first chipmaker to do so.

Samsung’s 3nm chips will be the most advanced semiconductors in the industry yet, with a 35 percent decrease in area, 30 percent higher performance and 50 percent lower power consumption.

Roh said Samsung, the world’s largest memory chipmaker, is making rapid inroads into the contract chipmaking market, where it still lags far behind dominant player TSMC.

According to industry tracker TrendForce, TSMC took 53.5 percent of the global foundry market, followed by Samsung with 16.3 percent, in the first quarter of this year.

“As far as I know, Samsung has improved performance rates of 3nm chips much faster than market expectations and has been adding new customers quite quickly,” he said.

Samsung’s foundry business is expected to grow about 40 percent from a year earlier, compared with an estimated 25 percent growth rate for the industry as a whole, it added.


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(Only the headline and image in this report may have been modified by Business Standard staff; all other content is auto-generated from a syndicated source.)

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