JAKARTA - Shares of Chinese memory chip companies jumped on Monday's trading. The increase was triggered by investor expectations of the listing plans of South Korean memory chip giant SK Hynix on the Nasdaq.
China Daily, quoted Tuesday, July 7, reported that the strengthening was led by Shenzhen Longsys Electronics Co Ltd. Longsys shares rose as much as 13 percent in early trading, before trimming some of the gains and closing at 681.8 yuan or about 100 US dollars on the Shenzhen Stock Exchange.
Other memory chip stocks also moved higher. CECport touched the daily limit, while companies such as JCET also strengthened.
Sentiment in this sector has strengthened as SK Hynix is scheduled to list on the Nasdaq on Friday. Citing Bloomberg, China Daily said the chipmaker is targeting a fundraising of around $29 billion. The value has the potential to be the largest IPO in the United States by a foreign company.
The listing of SK Hynix shares will be carried out through American Depositary Receipts or ADR with the stock code "SKHY". ADR is an instrument that allows foreign company shares to be traded on the US stock exchange.
The move is aimed at narrowing the valuation gap between SK Hynix and its US rival, Micron Technology.
The rise in Chinese memory chip stocks comes at a time when the global chip market is growing rapidly. Research firm Gartner estimates global chip sales will approach 9 trillion yuan by 2026, up 64 percent from the previous year. Of that amount, memory chip sales are expected to be around 4.3 trillion yuan.
Research firm TrendForce also sees DRAM supply to be very tight in the third quarter. DRAM contract prices are expected to rise 13 to 18 percent compared to the previous quarter. NAND Flash contract prices are also likely to rise 10 to 15 percent on a quarterly basis.
DRAM and NAND are two main types of memory chips that are widely used in smartphones, personal computers, tablets, and various other digital devices. DRAM is used for the device's working memory, while NAND is widely used for data storage.
TrendForce said demand from artificial intelligence or AI and data center development is still the main driver of the market. However, price increases are starting to be more moderate compared to the previous quarter as buyers from the personal computer and smart phone sectors are starting to limit their purchasing power.
"AI remains the main driver," TrendForce said.
According to TrendForce, memory suppliers are now shifting capacity to higher margin server products. As a result, supply for the consumer segment is limited and prices remain high, even though demand for personal computers and smartphones has weakened.
Global supply shortages and a surge in demand for AI for high-bandwidth memory have also contributed to a large price increase cycle in the memory industry. High-bandwidth memory is a high-speed memory that is much needed for AI and data centers.
At the same time, China's domestic memory chip industry continues to make progress, although the gap with global players is still wide.
CXMT Corp, China's largest DRAM manufacturer, is expected to launch an IPO later this year. Yangtze Memory Technologies' listing plans have also been approved. The company is said to be the only Chinese manufacturer capable of making 3D NAND flash chips from start to finish.
China Daily also noted the views of Shen Meng, Director of Chanson & Co. He said market participants continue to monitor SK Hynix's performance on Nasdaq as a reference for the two IPO plans of Chinese memory chip companies.
Roger Sheng, Vice President of Research at Gartner, said Chinese memory chip companies have made great progress. However, he assessed that there is still a large gap in advanced technology and production capacity between Chinese memory chip leaders and their global competitors.
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