Investor Presentation_ TMT Webcast_ Memory Downgrade, Japan and China WFE Update

Summary of Key Points from the Conference Call Industry Overview - Industry Focus: Semiconductor industry, particularly memory and technology sectors in Asia Pacific, with emphasis on companies like Samsung, SK Hynix, and Micron [3][4][32]. Core Insights and Arguments - Semiconductor Cycle: The semiconductor sales year-over-year (YoY) growth has peaked, indicating a transition from an optimistic phase to a more cautious outlook [6][4]. - Supply Chain Dynamics: DRAM and NAND supply chain inventories are at historically high levels, with DRAM inventory particularly elevated [20][22]. - Production Expectations: DRAM wafer starts are expected to increase by 15% YoY in 2025, primarily for High Bandwidth Memory (HBM), while NAND wafer starts are projected to rise by 13% YoY in 2024 [22][20]. - Valuation Concerns: The valuation for DRAM has reversed from its peak, with multiples correcting between 41-60%, and average market capitalization falling by 32-56% [26][27]. - Market Sentiment: There is a cautious sentiment towards memory stocks, with companies like SK Hynix and Nanya Tech being viewed as more vulnerable in the current downcycle [32][35]. Important but Overlooked Content - Cloud Capital Expenditure: Cloud capital expenditure is projected to grow by 52% in 2024 (excluding Amazon) and 8% in 2025, indicating strong demand in the cloud sector [15][16]. - CIO Insights: 75% of Chief Information Officers (CIOs) report that recent innovations in Generative AI and Large Language Models (LLMs) are directly impacting their IT investment priorities for 2024 [17]. - Investment Ratings: Various companies have received updated ratings, with Samsung Electronics rated as a safe haven due to its strong balance sheet, while SK Hynix has been downgraded due to concerns over its NAND business [32][35]. Company-Specific Insights - Samsung Electronics: Rated as a preferred investment due to its robust balance sheet and potential for margin improvement through price hikes [32]. - SK Hynix: Downgraded with a target price reduction from 260,000 KRW to 120,000 KRW, reflecting a 54% downside risk [32]. - Micron Technology: Rated as equal-weight with a target price of 140 USD, indicating a cautious outlook amid market volatility [32]. Conclusion - The semiconductor industry is experiencing a significant transition, with high inventory levels and cautious market sentiment. Companies are advised to focus on innovation and strategic investments in cloud and AI technologies to navigate the current challenges.