1. In 2026, approximately 55%-70% of the revenue growth for Samsung Memory, SK Hynix, and Micron will come from price increases, indicating a cyclical nature of growth. TSMC and Japanese semiconductor equipment manufacturers will contribute only about 15%-25% from price increases, with the majority of their growth stemming from advanced process logic, process control capabilities, and long-term technological accumulation. There are also significant differences in profitability stability: TSMC and ASE in Taiwan have much more stable gross margins throughout the cycle than memory companies, indicating stronger pricing power and technological moats.
2. The scarcity premium in the memory industry will gradually diminish after the market fully recognizes the supply shortage. Truly sustainable returns will come from companies that can weather multiple rounds of capacity expansion, continuously expand market share, and maintain pricing power. Given South Korea's deleveraging, slowing memory price increases, and potential interest rate hikes, a more cautious approach is warranted towards cyclical memory manufacturers like Samsung, SK Hynix, and Micron.
However, we cannot deny the AI capital expenditure theme. We recommend securing a more sustainable AI portfolio through investments in Taiwan and Japan. In terms of specific allocation, we hold a neutral stance on South Korean stocks, a positive stance on Taiwanese stocks, and continue to favor Japanese stocks in our global portfolio. Our core focus includes companies like TSMC, ASE Technology Holding, Tokyo Electron, and Advantest, which control bottlenecks in advanced manufacturing and equipment. (Source: Independent research firm TS Lombard)
