Daily: Clients make unprecedented offer to defray SK Hynix capex
4.5 min read.
Highlights
AI exposure rules. Despite calls of AI bubble last year, multiple news items today signal that AI and/or chip exposure is still driving market success. Alibaba, which has a chipmaking unit that it plans to spin-off and IPO, saw its shares rise 11% this week, compared to Tencent, a Big Tech rival but with no chipmaking unit, which rose just 2%. Elsewhere, South Korea’s stock market jumped a stunning 70% so far this year, largely driven by major chip stocks, far outpacing the S&P500’s nonetheless reasonable 7%. South Korea also has a record current accounts surplus, driven by record chip exports.
Desperate for memory chips. Clients of SK Hynix, the Korean memory chip maker, are offering to invest heavily in the firm, proposing to help defray the capex costs of new production lines and chipmaking tools, including ASML’s expensive EUV machines. The tech firms that purchase SK Hynix’s memory chips, face severe memory shortages. However, the Korean chipmaker is wary of ceding market power by making commitments to specific buyers and lowering their prices.
Also, a Korean newspaper reports that Samsung will expedite the construction of a new mega-fab in South Korea by 6 months in response to the heightened demand.
Domestic AI data centres. In a bid to raise exposure to AI, Japan’s SoftBank is looking to develop domestic-made AI data centres in Japan, while Taiwan’s MediaTek is looking to build Taiwan’s most advanced AI data centre.
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1. Policy and Geopolitics
1.1
Bloomberg (05/08): South Korea’s Current Account Surplus Surges to Record on Chips
South Korea’s current-account surplus surged to another record in March, driven by a surge in semiconductor exports and stronger shipments across Asia and the US, even as foreign investors sharply reduced holdings of domestic stocks amid rising Middle East tensions.
The current-account surplus reached $37.3 billion in March, the largest monthly surplus on record, according to Bank of Korea data released Friday. The figure far exceeded the previous record of $23.2 billion set in February, and marked the country’s 35th straight month of current-account surpluses, the second-longest streak of surpluses since the 2000s, the BOK said.
1.2
Reuters (05/07): Trump administration invites Nvidia, Boeing CEOs for China trip, report says
The Trump administration is inviting CEOs from Nvidia, Apple, Exxon, Boeing and other big companies to accompany the president on his trip to China next week, Semafor reported on Thursday.
Executives from Qualcomm, Blackstone, Citigroup, and Visa are also on the invitation list, according to the report.
In an interview with CNBC’s Jim Cramer, Nvidia CEO Jensen Huang said, “We should let the president announce whatever he decides to announce ... If invited, it would be a privilege, it would be a great honor to represent the United States.”
2. Economy, Finance, and Business
2.1
Reuters (05/08): SK Hynix flooded with unprecedented offers from big tech firms to secure chip supplies
SK Hynix is being aggressively courted by big global tech firms with offers to invest in its new production lines and fund purchases of pricey manufacturing tools as they rush to secure memory chips, people familiar with the matter said.
The offers, unprecedented in the global memory chip industry, underscore the severity of the component’s scarcity around the world, as chipmakers struggle to keep pace with surging demand amid an artificial intelligence boom. Memory chips are critical parts in AI data centers, smartphones, PCs and other areas.
Another proposal involved customers financing equipment purchases such as ASML’s extreme ultraviolet lithography machines, which are used to print circuits onto silicon wafers and are worth hundreds of millions of dollars, three of the people said.
But the chipmaker, flush with cash, is cautious about taking financial commitments from customers, as such deals could hold it hostage to specific buyers and require it to supply chips at lower prices in exchange for securing longer-term and more stable revenue guarantees, two people said.
2.2
Bloomberg (05/07): Alibaba Shares Outpace Tencent’s as Chip Exposure Fuels Demand
The torrid stock rally in Asian chipmakers is driving a divergence between China’s two internet giants, with Alibaba Group Holding Ltd. gaining an edge over rival Tencent Holdings Ltd. due to investor enthusiasm about its ambitious semiconductor unit.
Shares of Alibaba, which plans to list its chipmaking arm T-Head, have rallied 11% this week, versus about 2% for Tencent that focuses more on artificial intelligence models and applications.
2.3
Reuters (05/08): Microchip Tech forecasts quarterly revenue above estimates on strong chip demand
Microchip forecast first-quarter revenue above estimates on Thursday, betting on strong demand for its chips used in industrial and automotive sectors.
Shares of the Chandler, Arizona-based company rose more than 2% in extended trading.
3. Technology
3.1
Korea Economic Daily (05/07): Samsung to advance mega-fab expansion by 6 months to get ahead in capacity race; SK Hynix follows suit
Samsung Electronics Co. is accelerating construction of a new mega-fab at its Pyeongtaek semiconductor complex by at least six months as South Korea’s memory chipmakers and their global peers race to secure dominance in the booming artificial intelligence era.
3.2
Nikkei (05/08): SoftBank in talks with Nvidia to build made-in-Japan AI servers
Japan’s SoftBank Corp. looks to develop and produce homegrown artificial intelligence servers, weighing plans to start designing and assembling components by the end of the decade with the help of major players like Nvidia and Foxconn, Nikkei has learned.
3.3
Nikkei (05/07): MediaTek launches Taiwan’s most advanced data center to maintain AI edge
MediaTek, the world’s leading mobile chip developer, is building Taiwan’s most advanced AI data center, as chipmakers increasingly invest in artificial intelligence infrastructure to maintain their technology edge.
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