This is not the first time a shock from Chinese chipmaker ChangXin Memory Technologies (CXMT) has sent Korean stocks tumbling. In late July, CXMT's successful listing combined with concerns over China's advances in chip technology to drive the KOSPI down 10.84% in a single session. After three straight days of declines, the index rebounded on the 31st of that month with a record one-day gain of 17.91%, as strong results from Microsoft and growth in its Azure cloud service revived expectations that artificial intelligence investments would start paying off.
The CXMT shock returned to rattle markets on the 13th, two months later, but this time no clear catalyst is in sight to calm the anxiety. Doubts about the profitability of AI investment and concerns over China's technological catch-up have grown, compounded by the end of share buybacks at the country's two largest chipmakers and foreign capital outflows ahead of Anthropic's listing in mid-November. Analysts said the KOSPI's upside will be capped for some time because of the lack of a rebound driver.
The KOSPI briefly fell below 6,000 on the day, its lowest level since July 30, after remarks from leading figures in the chip industry heightened concerns about the capital required for AI investment and the returns it will generate. Broadcom Chief Executive Hock Tan said at a conference in Singapore on the 12th that investors were effectively sitting in a casino, and that the memory shortage could look different a year from now, just as various bottlenecks had been overcome over the past two years. He also pointed to a shortage of capital as the biggest constraint, citing OpenAI's large losses. Intel Chief Executive Lip-Bu Tan, who attended the same event, identified rising capital costs as an urgent challenge and said investors were demanding returns on invested capital. The comments sent U.S. chip stocks sharply lower, and the selling spread to large-cap Korean chipmakers on the day.
Samsung Electronics (005930.KS) and SK hynix (000660.KS) fell more than the broader index. Samsung Electronics closed down 7.39% at 232,000 won, while SK hynix ended 10.09% lower at 1,443,000 won. Analysts attributed the declines to weakness in U.S. chip stocks and to concerns that the two companies would suffer the heaviest damage if CXMT's technological catch-up materializes.
CXMT President Cao Kanyu said earlier that the company would unveil a 4F² server DDR5 DRAM chip based on vertical surrounding gate (VSG) technology within the year. Memory makers currently raise density on a 6F² process, which uses a relatively larger area, by drawing thinner circuit lines with tools such as ASML's extreme ultraviolet (EUV) lithography equipment. The 4F² structure instead narrows the area and stacks cells vertically to increase density. For China, which cannot obtain EUV equipment, stacking layers offers a detour from the race to shrink line widths.
Whether the chip can actually be mass-produced remains an open question. The 4F² structure is difficult to manufacture, making yields hard to secure, and it suffers from high current leakage and heat. Samsung Electronics and SK hynix expect commercialization of 4F² to come after 2028. Cao also referred only to unveiling the chip within the year, staying silent on the timing of mass production and specific performance. Even if a product appears this year, it is likely to amount to no more than a prototype for technical validation, according to analysts.
Still, CXMT's rapid progress stokes concerns about intensifying competition in chips, a burden for Samsung Electronics and SK hynix. Goldman Sachs estimates CXMT's supply capacity will expand to 41% of Samsung Electronics' and 50% of SK hynix's by 2028. An industry official said that internally, Samsung Electronics and SK hynix are more worried about CXMT's advance than about the possibility that AI infrastructure investment will stall. That is why analysts say oversupply from China and the threat to market share are weighing on investor sentiment regardless of the technology's maturity. Lee Jong-hyung, head of research at Kiwoom Securities (039490.KS), said a technical rebound is possible after a sharp drop, but that rebounds and renewed declines could repeat unless uncertainty in the chip sector is resolved.
Sentiment weakened further after BlackRock cut its recommendation on U.S. equities to neutral from overweight, citing high Treasury yields.
Analysts agreed that with macroeconomic concerns such as the risk of war in the Middle East and high interest rates persisting, and with no clear near-term catalyst, the KOSPI's upside is limited while downside risk remains. Chung Yong-taek, senior research fellow at IBK Investment & Securities, said the market is taking good news for granted while reacting sensitively to bad news. He added that while China's technological catch-up is not yet a reason to lower earnings forecasts, it is amplifying anxiety in combination with concerns over AI profitability.
Deteriorating profitability from the stronger won against the dollar is another factor fueling market unease. Samsung Electronics announced record third-quarter operating profit of 107 trillion won, but that proved insufficient to turn the market around. Baek Young-chan, head of research at Sangsangininvestment&Securities (001290.KS), said Samsung Electronics' strong results were already known to the market, and stressed that the market will need a new sector to lead it, or an easing of geopolitical uncertainty, before it can regain momentum.
Brokerages expect the KOSPI to trade between 6,000 and 7,000, while warning that a steady stream of negative news could send it back to test July's low of 5,593.56. Kiwoom Securities put its near-term range at 5,500 to 7,000, with the ceiling capped at 7,000. Sangsangininvestment&Securities maintained its existing range of 5,800 to 8,700 but set the low end at 5,750.