On the last day of July, the South Korean stock market staged a dramatic rebound. However, the overall scorecard for the South Korean stock market for the entire month of July has been disastrous. It was not merely a bear market; amidst the chaos of sidecars and circuit breakers triggering day after day, sighs echoed that "this can no longer be considered a normal market."

If you examine the "bad factors" that whipped the market into such a frenzy one by one, almost none of them cast doubt on the fundamental health and fundamentals of South Korea's top-tier companies. (We will look into this later.) However, the two China-triggered shocks that hit on the Monday of the final week of July directly challenged doubts about the "fundamentals" of South Korea's semiconductor industry. To be more precise, one might say that the aftermath of these shocks hit with exceptional strength precisely when nerves were already frayed. News of China's "localization of immersion DUV equipment" and CXMT's listing on the Chinese mainland stock market were the first dominoes to knock down this week's "three-day consecutive plunge domino."

What on earth is "immersion DUV lithography equipment," and why has this news turned the global AI ecosystem upside down? Has China truly finally breached the "sanctuary" of core semiconductor processes that it had never properly accessed before? Why did the stock prices of South Korea's Samsung Electronics and SK Hynix fall more than ASML, which has monopolized global lithography equipment manufacturing? How did "SiCarrier," which is set to mass-produce "immersion DUV" this year, achieve such progress in just three years since its establishment? Is China's "immersion DUV" really at a level that will rapidly lead to a generational leap for Chinese semiconductors?

CXMT (ChangXin Memory Technologies), which skyrocketed about fivefold compared to its IPO price immediately upon listing on Monday and instantly took the top spot in market capitalization on the Chinese mainland stock market, also added to this week's shock. In fact, ChangXin Memory's presence has been distinct for some time. Although it is still said to be far behind "Sam-Hynix" (Samsung and SK Hynix), it is nevertheless a company that has already risen to 4th place in global DRAM manufacturing. Its share of global DRAM jumped from 3% to 8% in a year. Amidst the AI craze, the fact that "Sam-Hynix" became overly busy also gave wings to Chinese memory semiconductor companies.

China remains South Korea's "largest customer" for semiconductors. Semiconductors exported to mainland China and Hong Kong still accounted for 45% based on sales revenue in the first half of this year (January to April). Semiconductors heading to Taiwan, which include "AI memory" to go into Nvidia's AI accelerators, remained at only 14%. This means China is still the "wallet" for Sam-Hynix. However, what if ChangXin Memory, backed by the deep pockets of the Chinese government that never run dry, mobilizes the capital power gained through this listing and takes advantage of this gap to launch aggressive investments? What if the assistance of the Chinese government—urging Chinese companies to "use domestic semiconductors as much as possible"—and the rapid advancement of semiconductor processing within China intertwine? Does such a picture currently manifest at a level sufficient to raise doubts about the market dominance of "Sam-Hynix" in China?

In the final week of July, fear bordering on panic hung over the South Korean stock market and "Sam-Hynix." Yet, when parsed one by one, reasons to doubt the "fundamentals" of South Korean semiconductors are still not visible. SK Hynix did announce earnings that fell short of market consensus. (Though it was massive revenue and massive operating profit margins, expectations had grown just as large.) But looking closer, this consensus miss actually acts as a factor that fosters a more positive outlook for SK Hynix's future. What on earth is this "paradox of disappointment"?

Other factors are even further removed from "fundamentals." 1) Doubts about how long American hyperscalers can continue such "blind AI investments" are making the market uneasy. This is the so-called "AI investment peak-out" concern. In fact, however, substantial grounds indicating that their investments in memory semiconductors will soon halt are nowhere to be seen. 2) Even assuming the "high-interest rate environment"—which is one of the anxiety factors shaking the market right now—American big tech companies are precisely the ones that can keep investing until the very end when everyone else throws in the towel. 3) The Iran war continues in an unsettling manner, but while a resource-consuming protracted war may persist, the possibility of it escalating into an "all-out war" appears slim. 4) It seems undeniable that single-stock leverage products launched in an environment where just two stocks, "Sam-Hynix," account for nearly half of the total market capitalization have muddied the entire waters of the market. Not only us, but foreign investors as well, are uttering words like, "Even if you can make money in a market with such high volatility, I don't want to be in it." Nevertheless, the authorities' "cleanup measures" are coming out one by one, after all. And this was precisely an issue unrelated to the "fundamental health" of the blue-chip companies within our market. 5) Rebalancing for South Korea has taken place within the MSCI Emerging Markets Index, and there was also de-leveraging by hedge funds. This is likewise an issue of selling pressure with a time limit.

The monopolistic and oligopolistic positions enjoyed by Samsung Electronics and SK Hynix in the memory semiconductor market amidst the unprecedented wave of the "early days of AI" remain solid. The problem lies in the fact that we do not know where China, which currently looks very far away, will stand 5 or 10 years from now. Is the news of the "localization of immersion DUV" flying in from China merely a blank cartridge, or is it the first signal that the solo run of South Korean semiconductors is coming to an end? Reporter Kwon Aelee breaks it down sharply for you on [SmartE].


1. 'China Shock' That Dragged Down Sam-Hynix Stock Prices
2. Did China Breach the Advanced Semiconductor Process 'Sanctuary'?
3. Hiding by Changing 'Corporate Name Tags'?
4. The Real Fear Unleashed by 'CXMT's Listing'
5. China Shock: Is It a 'Real Fear'?


(Reported by Kwon Aelee, Photography: Park Woo-jin and Cha Seung-hwan, Planning: Jung Seo-woo, Editing: Chae Ji-won, Design: Chae Ji-woo, Intern: Kim Hye-won, Production: Knowledge Contents IP Team)