[Living Economy] AI Semiconductor New Class also said, "TSMC 'Gap' Nvidia, even if it fights, it's a loss."

-TSMC's post-process is awkward? That's how difficult it is, even if you want to give Samsung, it's not technology.
- TSMC was moved because of its performance, but Samsung's opportunity? Tough
-Meaning of TSMC and ASML gap, non-AI semiconductor market winter
-中 Semiconductors are terrible, they are not promising due to subsidies
-The speed difference between Hynix and Samsung Electronics' HBM technology? Thanks to Korea-U.S. Semiconductor

■ Broadcast: YTN Radio FM 94.5 (09:00-10:00)
■ Host: Reporter Cho Tae-hyun
■ Air date: October 18, 2024 (Friday)
■ Talk: Lee Sun-yeop, director of Shinhan Investment Co., Ltd.

-Amazon SMR superiority in investment reasons, data center location, cost, and convenience

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information.
◆ Reporter Cho Tae-hyun (hereinafter referred to as Cho Tae-hyun): Reliable information for 14 million individual investors. Useful information is more important than anything else. It's time to give you money-making information. It's time for the Live Stock Institute. Today, we will be with Lee Sun-yeop, director of Shinhan Financial Investment, who is the jewel of the vivid economy. Is the director here?

◇ Lee Sun-yeop, director of Shinhan Financial Investment (hereinafter referred to as Lee Sun-yeop): Yes, how are you?

◆ Cho Tae-hyun: We're going to focus on semiconductors today, but let's look at the New York Stock Exchange overnight. It closed mixed, but economic indicators are coming out very well.

◇ Lee Sun-yeop: Yes, that's right. Especially today, retail sales came out positive. In the end, in the case of the United States, 70% of GDP is consumption, so this consumption is coming out very well, so the economy is very solid. You may remember that there was a lot of controversy over the U.S. economic downturn in the entire global market recently. The U.S. employment index, which came out last month, was good and retail sales are very good, and if this happens, concerns about a recession are likely to subside for the time being. What is clear is that in the past, when the U.S. cut interest rates, the rate cut was eventually recognized as a signal to the recession, but now it is not, and today's indicators seem to show that the U.S. economy is very solid.

◆ Cho Tae-hyun: There are evaluations in the market that only the U.S. is different. How do you rate this?

◇Lee Sun-yeop: I think he's right when looking at the economy. In the case of the United States, the reason why the economy is so solid now is that the United States had a lot of policies to revive the economy now. For example, I think it is positive that the IRA of children and the Semiconductor Chip Act, which have been done since President Biden, have implemented many policies that can transform the U.S. economy into a manufacturing country in the future. And as you know well, I think I used the most economic stimulus measures in the world during this COVID-19. I think there should be a lot of money and various policies, and finally, there is a shortage of people in the United States as a whole. It's the same in Korea, but people's actual purchasing power is a little low despite their high prices, but in the end, people's jobs are still maintained. So it's much better than Europe or China right now. As you know, in the case of Europe, the impact of prices this time was much greater than other factors, but the impact of the war with Russia was very large. In terms of energy, some gas pipes on the Russian side were problematic, so we had to endure high energy prices, and in Europe, there are not many industries that can live on. In particular, the luxury industry was very good, but I think there are some areas that have become difficult as the Chinese have recently reduced their consumption of luxury goods. China is very difficult due to real estate and U.S.-China conflicts, so in many ways, it seems that the economic situation that is only good in the United States and very difficult outside the United States continues.

◆ Cho Tae-hyun: Okay. These things will also affect the market, so we need to look at the overall macroeconomic situation. I told you that today is a semiconductor stock special, but TSMC's performance announcement came out yesterday. I was surprised, but it came out really good.

◇ Lee Sun-yeop: Yes, that's right. In the case of TSMC, it is a foundry company, a semiconductor company on demand. If Apple or Nvidia in the United States ask you to make semiconductors like this, you can think of it as a company that makes semiconductors. Recently, there are parts that require high technology in semiconductors, and TSMC has the greatest competitiveness in the world, especially in recent cases, AI-related semiconductors centered on Nvidia. As a whole, a semiconductor called GPU, is well made by itself, so it can be said that it has achieved a very positive performance in its own way. As you know, the demand for semiconductors for AI has been shown to be very strong, and TSMC is the best compared to Nvidia. In fact, Nvidia chips have nowhere else to make except TSMC. So, there's been a fight recently. You can say that even if you fight, Nvidia is the only thing you can lose.

◆ Cho Tae-hyun: Okay. In a way, it seems to have gone up to the position of Super Eul, but I envy you. I'm very jealous. Apple and Nvidia were mainly producing TSMC products, but as the director mentioned earlier, Nvidia and TSMC have recently been blamed on you. I think it's kind of bumping into each other. What kind of situation is there?

◇ Lee Sun-yeop: Yes, that's right. I think Nvidia, which we know in the process of making now, has a little problem in the post-process. After that, the process is very important, and this process must be done well to produce low power. So, things like eating less electricity come out, and I complained a little about that. In regards to this, TSMC is arguing that your design is wrong. What are you talking about? It's not our fault. TSMC is best at post-processing in the world. Considering those things, if you think that even TSMC as we know it was difficult, you can think that it was a semiconductor that required very high-level technology.

◆ Cho Tae-hyun: It must have been a very difficult semiconductor to make. You're talking about Blackwell, but as you just said, whether it's a bickering situation or whether the situation will get worse in the future when we punch each other like that, the loss will inevitably go to Nvidia. Can I say that there is a possibility that Samsung Electronics will receive this quantity?

◇Lee Sun-yeop: I don't know if Samsung Electronics shows it, but it seems unlikely right now. Because the biggest parts that various companies have recently turned their backs on Samsung Electronics are very different from the performance that comes out when they leave it to Samsung Electronics and the performance that comes out when they leave it to TSMC. Then, if Samsung Electronics makes any significant technological progress in relation to the post-process, I don't think it will be able to move on to Samsung despite the current uncomfortable relationship between the two. First of all, Nvidia would like to do that, but Nvidia continues to think that it would be nice for Samsung Electronics to take over more in some way and is making a lot of efforts to give opportunities to our companies, but unfortunately, TSMC still has a little bit of room for technology that we can't receive.

◆ Cho Tae-hyun: So, so-called high-bandwidth memory HBM and this foundry, but we want to give more to our company, but we can't because of the technology.

◇ Lee Sun-yeop: That's right. Example

◆ Cho Tae-hyun: Samsung in technology is now being evaluated as being behind in technology. Prior to the TSMC performance announcement, the Dutch ASML performance also came out. The problem is that TSMC was good, but ASML was very bad. Why was it so bad on this side?

◇Lee Sun-yeop: The equipment that ASML makes usually makes equipment called EUV. Exposure equipment. If you look at it easily, many viewers say that semiconductors become very small, and when you micronize them, you have to draw a semiconductor circuit diagram very finely. You can think of it as the equipment that you take when you take pictures, but don't we usually say 2 nanometers or 3 nanometers? When you do those things, you can think of it as a very expensive equipment, and you can think of it as the only production in the world.

◆ Cho Tae-hyun: This place is also super-eul.

◇Lee Sun-yeop: This is also a supermarket. Recently, however, as the performance has been halved more than expected, there have been talks about what happened, but in the end, Samsung Electronics and Intel, which have been suffering from sluggishness in semiconductors recently, have reduced exports. In terms of Intel and Samsung Electronics' reduction, some of the semiconductors we mentioned earlier are the foundry, but there is a general legacy semiconductor. Legacy is literally just an old semiconductor and DRAM. As the demand for PCs, computers, or smartphones is sluggish in the current market, you can think of it as reducing certain orders related to it. If you compare it with TSMC you mentioned earlier, AI semiconductors are very hot in the semiconductor market, but the rest of the semiconductor market is winter. I think this is the part of TSMC and ASML sharing their performance.

◆ Cho Tae-hyun: Okay. There won't be that many customers on this side, so if things like Samsung and Intel get bad, they will naturally be affected by their performance. Another thing is that these U.S.-China disputes continue to accelerate. Don't sell it to ASML now. Don't do ASML either. Aren't you pressuring me to this extent?

◇Lee Sun-yeop: I think there are parts like that. China is now working hard on semiconductors and is saying that its market share is increasing recently, but it is true that actual semiconductor products are poor. It's not a semiconductor that can be used properly, and the defect rate is very high, and I think the profit rate of Chinese semiconductor companies is almost to the point where the company is almost doomed. Of course, it's not going to go bankrupt because it's subsidized. It's related to that part in its own way, but anyway, in the United States, we have the will to block the room for China to keep chasing, and I think it will continue to do so, but the problem is whether this can be applied to Korean companies in the future. Korea's Samsung Electronics and Hynix are doing so well right now, and there are many factories in China, but if Korean companies cannot bring semiconductor equipment to factories in China in the future, they cannot be upgraded. Then, Hynix and Samsung Electronics are currently concerned about the things that can become very useless, and they actually held such a press conference not long ago. This is because Korea is a country that is very good at semiconductors, but among semiconductor equipment, very large semiconductor equipment and most of the highest-spec equipment are owned by Texas Instruments and most American and Japanese companies. Like ASML in the Netherlands, if we control such technologies in the U.S., it's very difficult for us. I think you can look at it like this.

◆ Cho Tae-hyun: I've been to semiconductor factories of domestic companies in China a few times, but the large scale may not be upgraded properly. It could be like a whale fight again.

◇Lee Sun-yup: As you know now, we have negotiated with the United States and have put this on hold. However, it's okay if the postponement or release is over, but if it's not, we don't know whether it'll be Harris or Trump, but we have to think a lot about what changes the U.S. president will make in the future. If those things become a reality, some additional profits for Korean companies' semiconductors will be limited, so we have to think about these risks overall.

◆ Cho Tae-hyun: Okay. The sadness of a small country, which is always in this whale fight, is appearing again. Let's take a look at another company. When we talk about semiconductors, we usually talk about Samsung Electronics and SK Hynix, but Hanmi Semiconductor announced its performance yesterday. The operating profit has increased a lot. First of all, there may be people who are not familiar with it, so what is Hanmi Semiconductor doing?

◇Lee Sun-yeop: Korea-U.S. semiconductors are called TC bonder, which is usually in charge of one of the processes when making HBM semiconductors. What is very important when doing the process is that semiconductors become fine as I mentioned earlier. What we usually make GPUs that Nvidia makes is GPUs that calculate a lot of data at once.

◆ Cho Tae-hyun: Parallel processing

◇Lee Sun-yeop: Then if you want to process a lot of data at once, you have to bring in a lot of data at once. It's HBM that allows a lot of data to come in at once. Then, in the past, if general DRAMs were refined, it was possible to be much finer, but now that micronization is technically limited, the same semiconductors were stacked without micronization. It's piled up. That's why if it's 8 layers, it's a stack of 8 layers, and if it's 12 units, it's a stack of 12. If you stack one up, it's considered to be one lane on the road, but if you stack eight, if you stack 12 eight lanes, it's 12 lanes. So if the car travels to 12 lanes, it will be very smooth. But the problem is that when you stack the eight, you don't just stack the eight, but you have to melt them and attach them. One of the melting and attaching technologies is Hanmi Semiconductor, which is currently a company with excellent technology in that technology. That's why Bonder means that it's attached.

◆ Cho Tae-hyun: So in the end, HBM is also the reason why Korea-U.S. semiconductors' operating profit soared by more than 3,000%. Can we look at it like this?

◇ Lee Sun-yeop: Almost right. Because companies that can do this now are focused on Hynix and Micron Technology, especially providing exclusive supply to Hynix. In this case, 8 semiconductors are stacked at once and heat is applied there to attach them. We're doing that, but Samsung has different ways of attaching them one by one, so Samsung is not making technological progress there, and in the end, in the case of Hynix through Korea-US Semiconductor, I think we've made some technological progress.

◆ Cho Tae-hyun: We need to keep an eye on these areas as well. Lastly, let's talk briefly. We've been talking about semiconductors so far. Increasing demand for semiconductors is ultimately the demand for artificial intelligence. As a result, this power continues to be an issue. Looking at this trend of big tech companies recently, it seems that they concluded that SMR is the only alternative in the end, what do you think?

◇Lee Sun-yeop: The main reason why SMR is an alternative is that it actually requires a lot of power, but what's good about SMR is that it can be built right next to the data center.

◆ Cho Tae-hyun: Because he's small.

◇Lee Sun-yeop: Yes, then we don't need a transmission and distribution network. This is simply good for semiconductor power, both solar and wind. As you know, this data center is located in the region and generates tremendous heat to operate the data center, so as you know, our country is also in Chuncheon, right? Chuncheon is cool in that area, so it's there. So, most of the U.S. build a lot of them in the Arctic Circle or something like that. Then it's a hot area where there's sunlight. So, even if this is developed, there is a big concern about this transmission and distribution network. So first of all, we need a lot more power than we think in the market right now, and having a long transmission and distribution network can be cost-effective and cost-effective.

◆ Cho Tae-hyun: Okay. Small module reactor SMR is in the spotlight, but commercialization has not yet started in earnest. Can we continue to look at the related stocks with anticipation?

◇Lee Sun-yeop: Yes, overall, I think it's okay so far, but first of all, the U.S. only designs it, but Korea has the technology to make it. Overall, just because Korean companies have that technology doesn't mean we can make it all, but in the end, you can think of it as "How long will we do it through technology development?" If you look at it later, it could be a certain number of orders and it could be beneficial.

◆ Cho Tae-hyun: Okay. I think I can look forward to this. So far, we have talked about various things surrounding the stock market situation with Lee Sun-yeop, director of Shinhan Financial Investment. Thank you for talking today.

◇Lee Sun-yeop: Yes, thank you.