KOSPI fell by 5.46% due to the sell-off of Samsung and SK Hynix stocks

On October 13, the South Korean stock index KOSPI fell by 5.46% to 6035.35 points. Investors were selling shares of chip manufacturers amid concerns about increasing competition in the semiconductor industry and the sustainability of the artificial intelligence market, reports The Korea Herald. During the session, the index dropped to 5911.11 points, the lowest level since the end of July, but by the close, the market partially recovered losses. The biggest impact on the decline was from shares of major memory manufacturers. Samsung Electronics shares fell by 7.39%, and SK Hynix– by 10.09%. The KOSDAQ index, which is dominated by technology companies, also fell by 1.43%. The main factor in the decline was news about the Chinese company ChangXin Memory Technologies (CXMT). At a press conference on October 10, CXMT President Cao Kanyu announced plans to introduce DDR5 RDIMM server memory modules based on a new DRAM 4F² cell architecture by the end of 2026. This architecture will allow reducing the memory cell area by about a third compared to the 6F² architecture. Samsung Electronics plans to start producing memory with a similar architecture only in 2028.

Investors were concerned not only about the timeline but also about CXMT's ability to establish mass production of the new chips, the details of which were not disclosed. Phillip Wool, Chief Strategist at Rayliant Global Advisors, called the market reaction disproportionate to the real threat, pointing out that the Chinese company has yet to demonstrate mass chip production and lags behind Samsung and SK Hynix in market share. The decline began on the US stock market. By the end of trading on October 12, the Philadelphia Semiconductor Index (SOX) lost 2.67%, and Micron shares fell by 3.5%. According to Saxo's Chief Investment Strategist Charu Chanana, the news about CXMT was merely a pretext for selling memory manufacturers' shares, while a more serious problem is the growing doubts about the profitability of AI-related companies amid increasing competition.

Additionally, on October 13, foreign investors sold shares worth 4.5 trillion won (about 3.4 billion dollars), which also contributed to the market decline. The majority of sales were in semiconductor manufacturers, continuing for the sixth consecutive session. From October 2 to 12, foreign investors sold South Korean shares worth 8.46 trillion won. The KOSPI decline also affected other Asian markets, for example, the Taiwanese Taiex index fell by 2%, and in Japan, SoftBank shares dropped by 8.5%, while equipment manufacturer Tokyo Electron– by 7.2%.