'China Chip Phobia' Drags Samsung, SK Shares Sharply Lower

*Editor's Note: 'AI PRISM' (Personalized Report & Insight Summarizing Media) is an "AI-based customized news recommendation and summary service" developed with support from the Korea Press Foundation. It selects and provides six customized news items by reader type.

1. China Chip Phobia Triggers KOSPI Plunge

- Key Summary: Amid spreading concerns over China's semiconductor technology self-reliance, the KOSPI closed at 6,023.66 on the 28th, down 10.84% from the previous trading day. According to the Korea Exchange, the KOSPI fell as low as 5,992.91 during the session, dropping below the 6,000 level for the first time since last April, while the KOSDAQ index also fell 7.72%. Concerns over the strengthening competitiveness of Chinese semiconductor firms such as Changxin Memory Technologies (CXMT) grew after news emerged that a state-run company in Shanghai, China, had begun producing immersion DUV lithography equipment. As a result, semiconductor stocks were dealt a direct blow, with Samsung Electronics (005930) plunging 13.39% and SK hynix dropping 14.65%.

2. KOSPI Down 28.9% in July, Larger Drop Than Financial Crisis

- Key Summary: The KOSPI's July return came in at -28.9%, surpassing the largest decline (-23.1%) during the 2008 global financial crisis. According to the Korea Exchange, this exceeds the Nasdaq's decline (-22.9%) during the 2000 IT bubble collapse and approaches the -27.2% drop of Black Monday in 1987. Investor sentiment froze as concerns over China's semiconductor rise were compounded by a rise in Nvidia's corporate bond credit default swap (CDS) premium and the possibility of a surprise interest rate hike by the U.S. Federal Open Market Committee (FOMC). However, the securities industry is also raising the view that a bottom may have been reached, as valuations have fallen to their lowest level since 2000.

3. Mass Production of DUV Could Further Narrow Technology Gap

- Key Summary: China's own production of immersion DUV lithography equipment carries significant ramifications, as the last barrier that has constrained China's semiconductor rise could be shaken. According to TrendForce, China has already secured a considerable self-sufficiency rate in the deposition, etching, and cleaning fields, but had virtually no self-sufficiency in the lithography field. Changxin Memory Technologies (CXMT), reportedly the priority recipient of this equipment, is expected to significantly raise its self-sufficiency rate in the commodity DRAM market by 2028. However, some point out that with volumes limited to five units this year and 20 units next year, negligible compared to ASML's annual supply scale, it is premature to conclude this represents an achievement in technology self-reliance.

4. AI Investment: Timing of Recovery Is Key

- Key Summary: Although Alphabet's second-quarter net profit exceeded market expectations, its stock price fell nearly 4% immediately after the announcement. While cloud revenue grew more than 80% and its order backlog reached $514 billion, the fact that annual capital expenditure (Capex) guidance was raised to $205 billion and quarterly free cash flow (FCF) turned negative drew attention. As a result, the market's evaluation standard appears to be shifting from profit size to the speed of investment recovery. Alphabet is analyzed to have received relatively favorable evaluations by presenting concrete recovery paths, such as a large order backlog and improved cloud profitability.

5. Nvidia Signs 73 Trillion Won Data Center Lease, Sparking Circular Financing Controversy

- Key Summary: Nvidia is reported to have signed a contract to lease a 1-gigawatt (GW) class data center under construction in Texas, U.S., on a long-term basis worth up to $50 billion (about 73 trillion won). According to the Financial Times (FT), Nvidia agreed to lease facilities from data center operator Hut 8 for $19.6 billion over 15 years, with the figure expected to reach up to $50 billion over 30 years upon renewal. The facility is set to be equipped with a large number of Nvidia graphics processing units (GPUs), and a plan to sublease it to neoclouds (emerging cloud operators) after completion is also under consideration. Following earlier discussions of payment guarantees for the OpenAI data center project, this contract has again raised controversy over circular financing, in which the AI chip manufacturer supports even its customers' financing.

6. Amid Currency Variables, Hanwha Ocean (042660) and Samsung Heavy Industries (010140) See Mixed Earnings

- Key Summary: The second-quarter earnings of Hanwha Ocean and Samsung Heavy Industries diverged due to differences in currency hedging methods. According to the Financial Supervisory Service (FSS), Hanwha Ocean's operating profit came in at 736.1 billion won, up 98.0% from the same period last year and beating market expectations, while Samsung Heavy Industries' operating profit rose 58.7% to 325 billion won but fell short of market expectations. Hanwha Ocean, whose hedging ratio is only in the single digits, directly benefited from the recent won weakness (rising exchange rate), while Samsung Heavy Industries, whose hedging ratio exceeds 100%, saw its profit margin pressured as volumes contracted at past low exchange rates were reflected in revenue. Samsung Heavy Industries expects that margin improvement will become visible after year-end, when volumes contracted during periods of high exchange rates are reflected.