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Korea IT H/W: Lessons Learned From History Help Find Opportunity

Mar. 03, 2020 12:27 PM ETFXCOF, MSFT, HXSCL, SSNLF1 Comment


  • Coronavirus fears are exacerbating worries about the potential disruption of the global supply chain and faltering demand.
  • Taiwanese PCB makers based in Hubei are seeing a recovery in utilization; CSOT obtained a special permit to continue production.
  • Foxconn is running at increasingly higher utilization rates after offering a CNY6,000 bonus to encourage employees to return to work.
  • The 2008 collapse of Lehman Brothers provides a valuable lesson; memory chip and MLCC price hikes should not be overlooked.

Chinese plants' run rate recover to over 60%; memory chip and MLCC prices poised to rise

As the coronavirus spreads to more countries, there are mounting worries about a disruption of the global supply chain and slowdown of demand. As the number of new cases spike in Korea, concerns are deepening over the operation of fabs in Korea, a dominant player in the global DRAM market. After SK Hynix's (OTC:HXSCL) Icheon fab and Samsung Electronics' (OTCPK:SSNLF) smartphone factory in Gumi confirmed that one of their employees was coronavirus patient, some worry that it could hamper the global supply chain. However, production is as usual at the two plants, and the Gumi plant accounts for less than 5% of Samsung's smartphone production and shipments out of the plant are steady as employees work overtime. Having experienced many power outages, Korea-based semicon plants have various contingency plans and since employees wear cleanroom garments anyway, we do not expect any production shortages. Meanwhile, memory chip consumers around the world are escalating efforts to build inventories as uncertainties loom over Korea, and this has had a positive impact on prices. PC DRAM spot prices have rebounded after slight corrections, and NAND MLC prices are soaring. Taiwanese MLCC makers are taking advantage of the situation by raising the utilization rates of plants based outside of China and preemptively raising their MLCC prices. Meanwhile, in Hubei, Taiwanese PCB makers as well as Chinese LCD and semicon players are operating. Tripod, a maker of PCBs for DIMMs and SSDs, is running at 20% capacity but is trying to overcome production losses by bolstering the Wuxi plant's utilization, which represents 60% of its total production capacity. Dynamic Electronics is keeping its utilization steady at over 70%. CSOT, another company with operations in Hubei, is keeping its LCD production line running after obtaining a special permit but BOE has postponed the ramp-up of its plant by one quarter. Taiwan-based MLCC makers such as Yageo

This article was written by

HYUNDAI MOTOR SECURITIES Co., Ltd. is the investment banking arm of the Hyundai Motor Group. It is a Korea-based company specialized in the provision of securities and financial services. The Company mainly engages in the securities dealing and brokerage businesses, covering stocks, futures, options, government bonds, corporate bonds, foreign exchanges and financial derivative products. It also engages in the provision of investment consulting services, Internet banking services, corporate financing services, corporate analysis services, as well as operation of trust business.

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Comments (1)

johndkopta profile picture
Thanks good HMIS.

Fine piece of work, as always.

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