The National Pension Service is steadily increasing its equity stakes in semiconductor materials, parts and equipment companies. It is seen as moving to "portfolio rebalancing," judging that the powerful upcycle in the semiconductor industry will spread to small and mid-cap stocks.
According to the Financial Supervisory Service's electronic disclosure system on the 10th, the National Pension Service raised its equity stake in Samsung Electro-Mechanics to 10.92% and in LG Innotek to 9.46%. It also disclosed additional purchases of equity in key semiconductor materials, parts and equipment corporations including TES (8.43%), ISC (6.16%), Hana Materials (5.01%), Korea Circuit (5.05%), VM (5.05%), DOOSAN TESNA (5.15%), HAESUNG DS (7.19%) and Eugene Technology (6.02%).
The market views the National Pension Service as having revamped its portfolio around materials, parts and equipment in step with the transition phase of the semiconductor "super cycle." With demand for next-generation technologies such as high bandwidth memory (HBM) and On-device AI surging, a trickle-down of earnings to the materials, parts and equipment sector is expected to kick into full swing.
Park Kang-ho, an analyst at Daishin Securities Co., said, "We judge that the strength in the share prices of Samsung Electronics and SK hynix has reached the point where it will spread to small and mid-cap materials, parts and equipment companies," adding, "With this year's results also expected to improve from a year earlier, the combination of increased investment and higher shipments leaves ample room for further revenue and profit upgrades."
Some in the market also say semiconductor materials, parts and equipment could become a cradle for future "tenbaggers." Kim Su-yeon, an analyst at Hanwha Investment & Securities, said, "Semiconductor materials, parts and equipment, where localization potential still remains, is a sector where more '100-baggers' could emerge going forward," adding, "HANMI Semiconductor and ISU Petasys are representative cases where sales grew by replacing imports in their respective process areas—back-end and printed circuit boards (PCB)—and, as a result, their share prices rose sharply."
Kim added, "Currently, the total market capitalization of semiconductor materials, parts and equipment is only about 8% of the combined market cap of Samsung Electronics and SK hynix," explaining, "the market cap of auto parts stocks has grown to about 75% of the combined market cap of Hyundai Motor and Kia." Given that both are export industries, the structural growth potential of semiconductor materials, parts and equipment is still relatively large.