Rising Exchange Rate Positive for Memory

[Hantoo Securities Chae Min-sook/Hwang Jun-tae] Semiconductor Industry Note: Rain showers tend to stop

● Rising Exchange Rate Positive for Memory Semiconductor Company's Performance
- Dollar Value Rise Positively Affects Memory Semiconductor Earnings
- Semiconductors have a high proportion of exports to domestic demand and all transactions between the headquarters, overseas subsidiaries, and customers are paid in dollars
- Based on the 23-year business report, exports of Samsung Electronics account for 88% and SK Hynix 94%
- The sensitivity of exchange rate fluctuations is lower in operating profit than in sales
- Since imported raw materials needed for semiconductor production are traded in dollars, the increase in raw material costs partially offset the increase in operating profit
- However, due to the nature of memory semiconductors, fixed costs account for the largest portion of sales costs. The proportion of raw material costs is relatively low, increasing sales and operating profit beyond the increase in material costs due to the rise in the exchange rate  

● Dollar Rise Memory Semiconductor Company Shares Weak
- Samsung Electronics and SK hynix shares generally weaken during won-dollar exchange rate rally
- During the strong dollar period, foreigners tend to sell domestic stocks. The stock prices of the two companies were also weak as the overall KOSPI index fell
- However, it cannot be said that the exchange rate and the stock prices of Samsung Electronics and SK Hynix are absolutely inversely correlated
- Factors affecting stock prices, such as the speed and degree of exchange rate rise, the macroeconomic environment, and the performance of the two companies, vary

● Let's look at the exchange rate as part of the whole picture
- In general, short-term soaring exchange rates negatively affect memory chip company stock prices
- However, since the stock price of memory semiconductor companies has shown a high positive correlation with performance such as sales and operating profit, it is difficult to make a judgment on the stock price direction based on the exchange rate alone
- Samsung Electronics and SK Hynix's performance estimates for 24 years are on the rise every quarter, and ASP's growth rate is also raised compared to early-year estimates
- Q1 earnings release and favorable business conditions after Q2 earnings release season expected
- If the exchange rate is overshooted in the short term, positive factors within the sector can be further highlighted when macro uncertainties are lifted

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