[R&E] South Korea's Exports Grow 48% in April on Return to Semiconductor Dominance... Proving Entry into IT Parts Upcycle

[R&E: Research & Epoch] This is News Epoch's signature report that integrates and analyzes global financial data and domestic securities firm research to forecast a new era of investment.

Global Market Brief

Last weekend, the New York stock market saw mixed results, with the Dow Jones Industrial Average falling 0.31%, while the S&P 500 Index and the NASDAQ Index rose 0.29% and 0.89%, respectively. In particular, the Philadelphia Semiconductor Index increased by 0.87%, driving the strength in technology stocks. However, the U.S. ISM Manufacturing Purchasing Managers' Index (PMI) for April recorded 52.7%, falling short of the market expectation (53.0%) and suggesting the possibility of an economic slowdown.

On the other hand, the April S&P Global Manufacturing PMI came in at 54.5%, exceeding expectations and showing a divergence between indicators. Notably, the price index within the ISM manufacturing report reached 84.6%, the highest since April 2022, revealing that inflationary pressure remains intact. International oil prices also continued their upward trend due to geopolitical risks, recording $101.9 for WTI and $112.2 for Dubai crude, further adding to inflation concerns.

Domestic Market Overview

The domestic stock market is expected to maintain a positive trend, supported by the strength of technology-focused stocks despite the mixed performance in the U.S. market. The MSCI South Korea Index ETF rose 0.77% on the previous trading day, reflecting improved global investor sentiment. In particular, South Korea's exports in April surged by 48% year-on-year, recording an upward trend for eight consecutive months, which serves as a strong driver for the market.

In detail, reliance on semiconductor exports reached 37.1%, and when including computer components, it amounted to 41.9%. The average daily DRAM export value for working days in April increased by 262% year-on-year to $950 million, while NAND increased by 289% to $76.08 million. The export value of SSDs also skyrocketed by 717% year-on-year, proving that the recovery in global IT demand is directly leading to performance improvements in the core domestic industries.

Key Industry Issues and Insights

Despite concerns over a global economic slowdown, the IT parts industry is confirming its entry into a strong upcycle. Japanese electronic components company Murata Manufacturing (TYO: 6981) saw its first-quarter operating profit surge 73.2% year-on-year, exceeding market expectations. Notably, new order amounts increased by 58.8% to hit an all-time high, and the book-to-bill (BB) ratio reached 1.36, surpassing the levels seen during previous MLCC boom periods. This suggests that AI-related infrastructure investments are driving the demand for high-value components.

A similar trend is confirmed among domestic companies. Samsung Electro-Mechanics (KOSPI: 009150) recorded a first-quarter operating profit of 280.6 billion won, beating market expectations by 3.4%. MLCC utilization rates are being maintained above 90%, and its second-quarter operating profit is forecast to reach 378.5 billion won, a 78% increase year-on-year.

The secondary battery sector is showing an intensifying divergence by stock. Samsung SDI (KOSPI: 006400) and SK Innovation (KOSPI: 096770) rose 8.4% and 10.0%, respectively, while LG Energy Solution (KOSPI: 373220) fell 4.3%. However, LG Energy Solution is evaluated to still have solid future growth momentum, as an imminent large-scale battery supply contract with BMW and a highly probable turnaround to profitability in the second quarter are expected.

The shipbuilding and defense industries are also robust. Samsung Heavy Industries (KOSPI: 010140) saw its first-quarter operating profit skyrocket by 121.9%, achieving an operating profit margin of 9.4%. Hanwha Aerospace (KOSPI: 012450) is also continuing its structural growth trend, with a 13.9% year-on-year increase in operating profit driven by the expansion of K-defense exports.

Market Signals

• South Korea Export Growth: April exports surged 48.0% year-on-year, beating market expectations (45.0%).

• Stellar Performance of Semiconductor Exports: SSD export value skyrocketed by 717% year-on-year, proving a recovery in IT demand.

• Global IT Parts Demand: Murata Manufacturing (TYO: 6981) broke all-time high records for new orders.

• MLCC Upcycle: Samsung Electro-Mechanics (KOSPI: 009150) is certain to see a 78% year-on-year increase in second-quarter operating profit.

• Secondary Battery Turnaround: L&F (KOSDAQ: 066970) successfully turned to profitability with a first-quarter operating profit of 117.3 billion won.

Epoch View: Investment Implications

Amid mixed global economic indicators, South Korea's April export figures and the performance of IT parts companies declare a strong recovery in the industry cycle. The demand for high-performance components, led by semiconductors and MLCCs, is solidifying the core positions of domestic companies within the global supply chain. Secondary batteries have entered a gradual recovery phase amid performance differentiation based on the technological capabilities of individual companies, while the shipbuilding and defense industries are serving as sturdy pillars of the domestic economy. Capturing structural changes in specific industries is the key to investing in a volatile market.

This content was created using News Epoch's proprietary AI algorithm, which analyzes public data from major domestic securities firm research centers and global financial media in real-time. It is an objective summary based on collected data and does not constitute a solicitation or recommendation to invest in any specific stock.