Korea's Meritz Securities: Now is not the time to sell Samsung and SK Hynix; there is a major misjudgment in the market.

South Korea’s Meritz Securities researcher Kim Sunwoo noted that the market has overreacted to misunderstandings about the fundamentals of Samsung Electronics and SK Hynix, advising against short-sighted and pessimistic judgments on the semiconductor sector based solely on fragmented information. Regarding rumors that SK Hynix secured orders by cutting prices when signing long-term supply agreements with major tech firms, Kim stated that these arrangements are not mere price sacrifices but strategic investments to pre-emptively lock in demand in the generative AI and AI data center markets. The company is expanding its medium- and long-term customer base through joint ventures and partnerships. He projected that DRAM demand fulfillment rates will reach only 75% to 80% in the second half of this year, potentially dropping further to around 60% next year; even when considering only actual end-user demand, the fulfillment rate remains at roughly 70%, meaning supply shortages will continue to deepen. Kim added that share repurchases, cancellations, and dividends from Samsung Electronics, as well as a potential special dividend from SK Hynix, will help ease market concerns. He also noted that both companies are currently in a stage of severe undervaluation and overcorrection.