Samsung and SK hynix widen supplier aid as supplier stocks slump

Shares of the companies that supply Korea’s two memory giants have lost more than 20% during the slide in Samsung Electronics and SK hynix, Seoul Economic Daily reported on Oct 18. A day later, Maeil Business Newspaper reported that smaller makers of chip materials, parts and equipment were tracking the two chipmakers down.

The response came quickly. Samsung and SK hynix are enlarging partnership programs that give their suppliers technology and funding support, Maeil Business Newspaper reported on Oct 19 and again on Oct 20. Neither company has disclosed how much money is involved or on what terms.

Both chipmakers lost more ground

SK hynix ended Oct 20 at 1,223,000 won (US$920.86). That was 3.85% below its Oct 16 close of 1,272,000 won, a drop spread over several sessions; in dollar terms it came to 3.61%. Samsung Electronics finished at 211,500 won (US$159.25), down 1.86% from 215,500 won over the same days.

The wider market bounced before giving way. The KOSPI gained 1.76% to 5,768.01 on Oct 19, then fell 3.73% to 5,552.74 on Oct 20. SK hynix lost 4.23% in that second session. Foreign investors’ net selling across all KOSPI shares, not just these two, totaled 538.8 billion won (about US$406 million) on Oct 20. Our explainer on how foreign investors move the KOSPI shows where that daily figure is published.

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The last few days extend a much longer decline. From Sep 22 to Oct 20, SK hynix fell 33.53% (32.03% in dollars) and Samsung 23.51% (21.78% in dollars). The steepest single day for SK hynix in that stretch was covered in our Oct 15 report.

One stock, a fifth of the index

SK hynix’s weight makes its moves hard for index holders abroad to avoid. On Oct 20 its market value of about 893.39 trillion won equaled 21.17% of the KOSPI 200’s total. The stock was down 15.25% over five sessions and 30.47% over 20.

Profits and the dates ahead

The price slide has come after strong reported earnings. Samsung’s preliminary third-quarter consolidated operating profit, filed Oct 8, was 107.4 trillion won (about US$80.9 billion). That was 20.01% more than the prior quarter and the highest in at least six quarters, on revenue of 195 trillion won.

SK hynix is scheduled to hold its third-quarter earnings call on Oct 28 at 09:00 KST. Samsung’s call is set for Oct 29 at 10:00 KST.

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Information only, not investment advice.