[Teheran-ro] The Miracle Created by Samsung Electronics and SK Hynix

Warren Buffett has long avoided semiconductors. They are a classic cyclical industry, and they did not fit his principle of investing only in businesses he can understand, or his "circle of competence."
Yet in 2022, Buffett invested about $4.1 billion in Taiwan Semiconductor Manufacturing Company Limited (TSMC). When a filing showed that Berkshire Hathaway Inc. had bought about 60.1 million TSMC American Depositary Receipt (ADR) shares, the market was rattled. What Buffett saw was not semiconductor prices, but the structure of the industry. TSMC was not just a chipmaker. It was a core infrastructure company for the era of artificial intelligence (AI).
At the center of this year's KOSPI Composite Index gains are Samsung Electronics Co., Ltd. and SK hynix Inc. Foreign capital and institutional buying are both ultimately concentrated in the two companies. In the past, semiconductors followed when the index rose. Now, semiconductors are leading the index.
In the past, the memory cycle was all about prices. When Dynamic Random Access Memory (DRAM) prices turned down, earnings and share prices collapsed. That is why semiconductors were seen as a typical cyclical sector. But what the market is watching now is not price, but High Bandwidth Memory (HBM). The key questions are who can supply it reliably and who can secure long-term contracts with Big Tech.
Semiconductors are now the power grid, the data center, and the national infrastructure of the AI era. That is why the current share-price rally is not just a simple run-up. It is a structural revaluation in which earnings push market capitalization higher, and market capitalization in turn lifts the KOSPI Composite Index.
Korea Investment & Securities Co., Ltd. said the HBM market has emerged as the central axis of the global memory industry. According to its report, the HBM market is expected to reach about $53 billion in 2026 and expand to $80 billion in 2027. From 2024 onward, the average annual growth rate is projected to reach 65%.
The Korean stock market is being lifted by Samsung Electronics Co., Ltd. and SK hynix Inc., while the government's value-up policy is lowering the market's overall discount rate. Add to that expectations of inclusion in the MSCI World Index, and the market is transforming for the first time into one that investors feel they must buy even when it looks expensive.
In the past, the KOSPI Composite Index was always valued below its earnings potential. Shareholder returns were weak, and distrust of corporate governance was deep. Even good companies carried a discount across the market. Now things are different. As treasury share cancellations and higher dividends continue, and as the semiconductor industry enters a structural growth phase, the market has begun talking not only about closing the Korea discount, but about a Korea premium.
Of course, there are concerns about overheating. It is also true that the pace is too fast. But markets always price in the future first. That was ultimately why Buffett bought TSMC.
dschoi@fnnews.com Reporter