Korea's semiconductor super-cycle continues, but analysts say the rally has entered its "second half." With Samsung Electronics (005930.KS) and SK hynix (000660.KS) both more than doubling this year, market watchers expect non-chip "supporting stars" to emerge as new market leaders, potentially delivering stronger returns than semiconductors.
"Chips in Late Innings"—But Excess Returns to Continue
Shin Hyun-yong, an analyst at Yuanta Securities Korea, said in a report Wednesday that "an analysis of about five semiconductor bull cycles since 2005 suggests the current chip rally has entered its late stages."
He stopped short, however, of saying the sector's upside is exhausted. "Even in the latter part of the cycle, semiconductors tend to deliver excess returns relative to the KOSPI," he explained.
The two chip giants have driven Korea's stock market this year. According to the Korea Exchange, Samsung Electronics rose from 119,900 won at the end of last year to the 260,000 won range as of Wednesday, gaining about 118% year-to-date. SK hynix surged approximately 147%, from 651,000 won to the 1.61 million won range.
With the KOSPI's top two stocks by market capitalization rallying simultaneously, the index broke above the 7,400 level for the first time in history.
Brokerage price targets continue to be raised. Daol Investment & Securities set a target of 390,000 won on Samsung Electronics, while Korea Investment & Securities (370,000 won), Eugene Investment & Securities (360,000 won), and Yuanta Securities (340,000 won) have also lifted their targets in succession.
For SK hynix, Eugene Investment & Securities set a target of 2.3 million won, Daol Investment & Securities 2.1 million won, and Mirae Asset Securities, KB Securities and Meritz Securities each offered 2 million won targets.
"Now It's Time for Non-Chip Supporting Stars"—Stocks Picked by Foreigners and Institutions
Shin highlighted that a key feature of the late stages of a chip bull market is "an increase in the number of sectors outperforming semiconductors."
"As the number of industries outperforming semiconductors grows, additional alpha can be generated through non-chip supporting stars," Shin said. "The key is stocks where supply-demand momentum from foreigners and institutions is expanding and where uptrends have already formed."
"Following the trend of supporting stars chosen by foreigners and institutions will be the core strategy in the latter half of the cycle," he emphasized.
He named LG Energy Solution (373220.KS), Doosan Enerbility, Samsung SDI, POSCO Holdings (005490.KS), LG Chem, Hyundai Rotem, SK Innovation, Taihan Cable & Solution, Sanil Electric, ISU Petasys, Lotte Energy Materials, CS Wind, LS EcoEnergy, Hotel Shilla and Pharmicell among related stocks.
Actual fund flows back up the analysis. Based on 200 stocks tracked by Yuanta Securities, foreign investors net purchased 925 billion won ($670 million) and institutions net bought 404.4 billion won ($290 million) this week (Monday through Thursday).
Both expanded their holdings in the semiconductor and equipment sectors, but funds also flowed into power, secondary battery, defense, cable and energy-related stocks, according to the analysis.
By contrast, pharmaceuticals and biotech as well as internet and gaming sectors saw net selling from both foreigners and institutions.
Chips Take a Breather—But Rally Isn't Over
Short-term overheating concerns have begun to emerge.
As of 9:40 a.m. Wednesday, Samsung Electronics was trading at 262,250 won, down 3.41% from the previous session, while SK hynix fell 2.60% to 1.611 million won. The declines were attributed to profit-taking following the recent sharp run-up.
Still, brokerages view the memory chip industry itself as remaining in a historic boom. Demand for high-bandwidth memory (HBM) and server DRAM is surging amid the spread of artificial intelligence (AI).
The market currently projects combined operating profit for Samsung Electronics and SK hynix next year at up to around 900 trillion won. Macquarie Securities forecasts combined operating profit of 924 trillion won ($668 billion), while Eugene Investment & Securities projects around 931 trillion won ($673 billion).
