Morningstar: SK Hynix and Samsung’s investment plans may bring the risk of oversupply.

Samsung Electronics and SK Hynix have announced large-scale investment plans. Morningstar equity analyst Jing Jie Yu stated that SK Hynix’s Yongin semiconductor cluster has a total committed investment of approximately 600 trillion won. If the new commitments are independent investments, this could signal a significant oversupply risk over the next decade. Uncertainty led to the stock price dipping at one point today. He noted that he still maintains the view that memory chip pricing is cyclical in the long term, expecting new production capacity to take at least two to three years to come online. Initial demand will exceed supply, but typically in the later stage—during the production capacity peak—demand slows, resulting in oversupply. Yu believes memory chip supply shortages will intensify, but long-term contracts and the large cash reserves of manufacturers are driving a series of capacity investments. Unless the return on investment of hyperscale cloud service providers can keep pace with sales and price growth throughout the period, this trend will be unsustainable over the next decade.