"What should I do with Samjeon?" Yeom Seung-hwan said, "Chairman Lee Jae-yong must return to the registered director."

[News FM Lee Ik-seon Choi Soo-young Issue & People]

□ Broadcast date and time: November 6, 2024 (Wednesday)
□ Host: Lee Ik-seon, Choi Soo-young
□ Cast: Yeom Seung-hwan, director of LS Securities

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information.

◆Choi Soo-young: Samsung Electronics' crisis theory is no longer news these days. Samsung Electronics is handing over SK Hynix's No. 1 memory title to the champion position when its competitor SK Hynix recorded an operating profit of KRW 17.6 trillion in the third quarter alone?

■Yum Seung-hwan: I think we've already topped the memory list. Looking at the performance this time, Samsung Electronics' overall semiconductor business performance has been delayed for now. But since memory and non-memory are combined, it's similar if you take it out and just look at the memory. It's kind of similar, but anyway, Samsung is always ahead. So the unexpected number one is HBM. Now, it was clearly seen that Hynix was a little ahead of the AI semiconductor supplied to Nvidia, so I think it's a little right to say that even though the numbers are similar, it's a little right to hand over the No. 1 title to Hynix.

◇ Profit line: But Samsung may deliver to Nvidia, a semiconductor for AI. I said this before. I think I'll pass the screening. Not yet. There was a story like this. You're hopeless?

■Yum Seung-hwan: I didn't mention it clearly again this time. I mentioned that the supply will expand in the fourth quarter anyway. It means that the expansion of supply will go in. In fact, in a way, it's an expansion of supply. What I mean is that we're supplying everything else. However, only Nvidia is not able to do it, but in other words, enlargement means that Nvidia is supplied. But I was just mentioning the possibility of enlargement to this, so I made it clear. It's not been mentioned in Nvidia yet. So I think we're going to do it in the fourth quarter, but the atmosphere itself is not 100% clear yet.
I'm sure you've heard a lot of such reports. It is a semiconductor called HBM, which has reduced its business division. A few years ago, because it wasn't the time for AI to open up. And this is a deficit business. There's no demand then. But Samsung is No. 1, and it focused more on the money side and made it more efficient than here, but Hynix didn't give up on HBM. We didn't reduce this division and bet on this, but anyway, we say luck is also a skill, and ChatGPT came out in October 2022. In the meantime, the situation completely turned around, and from Nvidia's perspective at the time, the company that was prepared was actually Hynix. So I chose Hynix's, and it fits well, right? HBM needs to be customized to Nvidia. Hynix matched it well, but once it's pierced like that, I keep using the customer's company, but Samsung tried to supply it, but the way they make it is different. But I don't think I met Nvidia's quality standards. Because Jensen Huang keeps wanting to use Samsung. It's better to use both evenly. Because using only one is a little disadvantageous in price competition. So, it's better to use Nvidia with two or three, but I haven't met that standard now.

◇ Profit line: It's been a long time since Samsung invested in semiconductors.

■Yum Seung-hwan: It's been a long time.

◆Choi Soo-young: Even if it's a Samsung Electronics crisis, Samsung Electronics' third-quarter operating profit is 9.1 trillion won. Why do you keep saying it's a crisis?

■Yum Seung-hwan: Now, the core of Samsung is basically home appliances, and now the smartphone makes 3 trillion won per quarter. I'm making money. Please put this on the floor. by default But semiconductors are the most important. Anyway, semiconductors determine stock prices and corporate value, but if we go like this and we can't supply to Nvidia and keep falling behind Hynix, Intel is in a very difficult situation right now, just like Intel, whose future value seems a little gloomy. So it's good to see 9 trillion won, but about half of the 9 trillion won is a semiconductor in a way, but when I looked inside the semiconductor, I can see that the competitiveness has been damaged a lot. So, if a company that makes an unusual 9 trillion won did something wrong when Samsung announced its earnings this time, it's now a reflection on semiconductors.

◇ Profit line: Looking at Samsung Electronics shares. It's about 56,6700 won. But actually, in the meantime, I've been recovering a little after 50,000 won, but now it's gone down from 59,000 won to 56,000 won.

◆Choi Soo-young: So what you just said is that even if Samsung Electronics makes money, the market is seeing uncertainty about the future.

■Yum Seung-hwan: Yes, so what if profits continue to decline here? But if you're confident that you're going to make more money in the future, the stock price won't fall out, but I can clearly see that I'm behind Hynix right now, so there's a concern about that, and the way to solve it is to show competitiveness again. We have only about a month or two left to supply Nvidia, so we have to show how we supply Nvidia within this year to reassure them. But it's not clear yet, so if you look at it today, Foreigners seem to be buying Hynix. I think foreigners are looking at Samsung negatively.

◇Lee Ik-seon: Then we should find a breakthrough, but in fact, Samsung is so big that it's a big axis of the Korean stock market. I'm sure there are a lot of people who have invested. I'm sure there are people who are nervous every day.

■Yum Seung-hwan: Samsung clearly knew what went wrong anyway, and looking at the recent article, CEO Jeon Young-hyun should redevelop it again. I think something is wrong. And I think we'll probably announce our greetings. So, I think the organization will be reorganized a lot, so something will change, but it can't be fast because it's such a big company.

◇Lee Ik-seon: I told you. Typhoons use most of their own energy to move around. So I think Samsung is like a typhoon right now.

◆Choi Soo-young: Samsung Electronics' foundry division was rumored to be spun off due to poor performance and yield problems, but Chairman Lee Jae-yong drew the line. By the way, TSMC, Taiwan's guardian company, is the number one position in the foundry, but is it true that Samsung Electronics continues to carry its foundry division?

◇Lee Ik-seon: What is the foundry division?

■Yum Seung-hwan: For foundry, the memory semiconductors I mentioned earlier generally make all the ones with PCs here and smartphones here in advance. So, it's a semiconductor that we remember, and we turn it around 24 hours in advance to make it. So, in fact, the product difference between Samsung, Hynix, and Micron is not that big. You can put anything in there. But the HBM I mentioned earlier is a memory, but it's uniquely customized. That's why I take orders in advance. So you can only use Hynix. In a way, you have to match it to Nvidia. So I can't use Samsung's together. So, the existing semiconductors are originally general-purpose. But HBM is not universal. That's customized, so Samsung's doesn't fit Nvidia's standards right now, so I can't go in.

◇Lee Ik-seon: So what about the foundry business?

■Yum Seung-hwan: Unlike that, foundry is non-memory. Regardless of storage, we often say that this is calculated by computers now. That's called CPU, and we usually don't remember doing calculations. But there are only a few companies in the world that make it. So what I mean is that Nvidia doesn't make chips. What this company does is design. Bring me this blueprint. Then, it's like an architectural office designs it and makes it to a construction company, for example. Foundry is a company that makes apartments through processes like apartments. So in semiconductors, foundry is commissioned production. So when an order comes in, it makes it the same as the design.

◇ Profit Line: TSMC is the undisputed No. 1 player in this field.

■Yum Seung-hwan: The world's No. 1 and Samsung is No. 2. That doesn't seem to be much different, but in terms of market share, that is, when it comes to high-tech semiconductors, it is called nano number. The lower the number of nanometers, the more advanced semiconductors are, and less than 7 nanometers are usually called advanced semiconductors. TSMC has a more than 90% market share for less than 7 nanometers. It's overwhelmingly the first place. So the second place in the school is Samsung Electronics, and the score is only 10 points. To give you a metaphor, it's like that. That's why the first place is almost monopolizing the structure. But Samsung can't give up on this because there are only a few companies in the world that can make it. The only companies that make it properly are Samsung and TSMC, especially high-tech semiconductors. Whether it's Apple or Nvidia, they only give me TSMC. Samsung doesn't give me the supplies.

◇Lee Ik-seon: But Intel, the leading U.S. semiconductor company, has been exploring Samsung Electronics' foundry alliance, so how can it get near the TSMC chin if this is realized?

■Yum Seung-hwan: No, there aren't many cases where it's good to be an ally. And in a way, Intel is now playing the 3rd place, and it's good to make up for what's lacking because the 2nd and 3rd places are good, but building arteries doesn't change anything right away. It takes time again. Therefore, the alliance effect is not so great, and what Samsung Electronics should do well now is that if you bring 100 to TSMC, for example, TSMC makes 70 to 80 proper products. For example, Samsung Electronics is 60 to 50 percent. It's falling down. Some say it's 60%, and they don't reveal it exactly. I don't know clearly, but what's clear is that it's inferior to TSMC. So no matter who the customer is, we have no choice but to leave it to TSMC. Samsung Electronics has to make up for this and meet the demand. But I don't think I did it right now. So, if you match those things step by step, so I secured a customer company, but when the customers received it, the yield fell, so some customers went back to TSMC and such sad things were repeated several times, so basically, it was rumored. So, there are situations where TSMC consults before Samsung, and if TSMC doesn't work out, Samsung will come. It's a pity, but it's not that you don't know this now. So Samsung is desperate, so there's definitely a market anyway. One day, there could be another crack. TSMC can't be the sole leader forever. Whatever the ecosystem, if you are prepared for it, Samsung will eventually have an opportunity someday, and what candidate Trump said now is that he openly criticizes TSMC. It's the same Chinese company, so I really hate China. And I think TSMC has taken a lot of things from American semiconductors. I'm making that remark aggressively. Then, even if Samsung meets the TSMC a little bit in a year or two, some of its U.S. customers may go to Samsung again. So, in the end, I think it will be a key part of how much Samsung raises demand rather than alliance.

◆Choi Soo-young: Listening to what Director Yeom is saying, Samsung seems to have some structural and internal problems. What do you think about the point that we need a little focused leadership like in the past, such as the return of the registered director or the revival of the control tower?

■Yum Seung-hwan: I think it's a must. There are quite a lot of people who think about the fact that the registered director has not been transferred. So, the registered director is an executive, but in the case of non-registration, the board of directors is held. The board of directors needs to be held to make important decisions there, but Chairman Lee Jae-yong is not registered. Technically, I can't join the board. So it's hard to make decisions now. Even if it's boiling, it's right to take responsibility if a company has a problem. But I have to go into the board of directors and make some important decisions, but most of the group companies in Korea are registered directors. But isn't there a problem with the fact that CEOs aren't working?

◇Lee Ik-seon: Why do I suddenly think of CEO Han Dong-hoon? He's having a hard time being outside the circle.

■Yum Seung-hwan: Anyway, come in and ask me to take responsibility for management. So, among the shareholders who were a little disappointed with Samsung, the sales of large-scale M&A Samsung have been stagnant for 12 years. The way to overcome this is to sell more existing products or increase them in M&A, but that's not the case now.

◆Choi Soo-young: Don't you have to have a decision-making agent to be good at M&A?

■Yum Seung-hwan: But the M&A wasn't going well, so it was very difficult.

◇ Profit Line: Looking at external requirements, there is a prospect that the market recovery will be hampered by increased production by Chinese memory chip companies. By the way, companies such as Changsin Memory Technologies are increasing their facility investment, but are you just aggressively securing that area?

■Yum Seung-hwan: So, in fact, Changsin Memory is actually the same as Samsung and Hynix do in a way, but of course, they can't make high-tech semiconductors and make things that are a little less specific, but the market is still quite big. But Samsung Electronics also cannot ignore this, with that part competing with Changsin Memory accounting for about 30% of semiconductors, but when China makes this, the price here plunges. So, if Samsung did not have Changsin memory in the past, it would have increased its semiconductor sales in China a lot. There's no alternative. But when there is an alternative, Chinese companies use the founding memory. Then Samsung can't take it that much. So the thing we always fear the most is Chinese airstrikes. Since China is starting to make most of the products we make the same, it is very difficult to compete with China among these export companies in Korea. First of all, it's basically cheap here. So there's actually no way to win there. But now, semiconductors are almost like extraterritorial regions, but now that I see it, companies are starting to create semiconductors even though the U.S. regulates them like that. This is a very scary story, and if China makes the same product as Samsung Electronics and all the products it makes now the same, it will be very chilling for Korea. It is quite difficult because the market is completely taken away, but there is no way to make high-tech semiconductors in the United States because President Biden has regulated them. Because we don't have that equipment. I have to make it with the equipment from the Netherlands, but it has been banned from the Netherlands to export it to China. But what can be advantageous in that part if Trump becomes Trump is able to regulate not only high-tech semiconductors but also low-end semiconductors that I just mentioned. Then, if Changsin memory becomes more difficult, this will also have a more advantage for Samsung.

◆Choi Soo-young: There are three cutting-edge materials for innovation. Material parts equipment. But if the equipment is not supplied like this.

■Yum Seung-hwan: I can't make it. So, it is not easy for China to reach high-tech semiconductors, but it is a reality that I am a little worried because I am making low specifications of general-purpose semiconductors scary right now.

◆Choi Soo-young: Then, a realistic question here. Samsung Electronics' crisis theory is now in the market anyway. Then, do we have to sell the people who own Samsung Electronics shares? Do I have to buy it? How should I look at the timing?

■Yum Seung-hwan: Samsung Electronics is not that weak. It's a bit like a crisis theory, but we earn 9 trillion won a year, and anyway, we're still the world's No. 1 company in memory in terms of the big trend. It's just that the position is a little shaky, and it's not supplying HBM Nvidia, and it's almost reaching supply, and it's also a competitor to supply Nvidia. I'm supplying to a company called AMD right now. It's not that I can't do HBM. Therefore, semiconductors are also essential global companies in the AI era, so I think the current plunge is not a time to run away from the perspective of investors, but rather an opportunity.

◇ Profit line: If you compare Nvidia and AMD,

■Yum Seung-hwan: Nvidia is still overwhelmingly good.

◇Lee Ik-seon: So why did AI semiconductor say Taiwan's TSMC was 90 and we were 10. So how much is Nvidia?

■Yum Seung-hwan: Nvidia is also 90. Inside the AI semiconductor,

◇ Profit Line: AMD is 10.

■Yum Seung-hwan: AMD doesn't have much weight right now. NVIDIA is still doing it, but this composition eventually breaks down.

◇ Lee Ik-seon: I see. Then, will SK Hynix be okay?

■Yum Seung-hwan: Because Hynix is almost exclusively supplying Nvidia, it's still good, the fourth quarter performance is good, and next year's performance is good. Not long ago, Chairman Chey Tae-won held a forum called AI Summit, and what he said was that Jensen Huang has another version after HBM. It's a product that will be released in the second half of next year, but I guess it was urgent. It's HBM4, but the name must have asked for it six months earlier. How urgent can you give it to me quickly? It's not easy to make it like that because you have a schedule, but if you ask Hynix like that, it means that they see Hynix's competitiveness as high as it is. So, looking at that, it seems a little clear that Hynix still has an advantage over Samsung as much as HBM.

◇ Profit line: SK Hynix is monopolizing it now, but we are increasing the market share by letting others share it.

■Yum Seung-hwan: There are only three companies that make HBM anyway. Since it is now a micron of Samsung Electronics in Korea and the United States, but even if Samsung or Micron comes in, the proportion is not much yet, so I think it will still continue to Hynix for the time being.

◇ Proficiency line: I see. Issue is Money So far, I have been with Yang Seung-hwan, director of LS Securities. Thank you.