【Major Bank Report】SK Hynix transaction unexpectedly reaches 24 trillion Korean won UBS: SK Hynix's three factors support profit margin Recommend buy

UBS report states that advanced process semiconductor manufacturers such as TSMC (Taiwan Semiconductor Manufacturing Company) and SK Hynix (KOR: 000660) occupy the most powerful position in the value chain. Their pricing is mainly driven by capacity and yield constraints rather than solely by input costs. UBS has assigned a “Buy” rating to SK Hynix.

SK Hynix rose 11.5% in a single day, closing at 1,880,000 Korean won, with a trading volume of 243k won, equivalent to approximately 129.2 billion HKD. Its market capitalization is 13.598 quadrillion Korean won, about 7.2 trillion HKD. Based on last Friday’s ranking in the US stock market, it ranks ninth with approximately 16.5 billion USD.

UBS states that although the impact of rising power costs cannot be ignored, (1) structural scarcity, (2) lengthy product qualification cycles, and (3) strong demand driven by artificial intelligence (AI) give these companies a stronger ability to pass on costs compared to most industrial sectors, enabling them to maintain and protect their profit margins.

In contrast, downstream electronics manufacturers and mature process wafer foundries lack this pricing power and remain highly exposed to rising input costs, chemical and gas supply issues, and yield bottlenecks.

Therefore, UBS recommends favoring advanced process wafer foundries and memory sectors, while avoiding downstream electronics and assembly supply chains.