Officials enter Samsung Electronics' office in southern Seoul's Seocho District, Oct. 31. Yonhap
The stock price of Samsung Electronics collapsed below the 50,000 won ($35.7) mark as market concerns amplified over U.S. President-elect Donald Trump's saber-rattling against chip incentives.
This was coupled with lurking doubts over Samsung Electronics' competitiveness, particularly in its semiconductor businesses, prompting foreign investors to unload shares. Analysts anticipate the current downturn may last until the uncertainties over the Trump administration's chip policies are cleared, and Samsung should be able to calm the market by restoring its competitiveness.
Samsung Electronics' share price ended at 49,900 won on Thursday, down 1.38 percent from a session earlier. It extended its losing streak for the fifth consecutive day, realizing initial market fears that the price may plunge below 50,000 won.
Samsung last traded below 50,000 won on June 15, 2020, amid the global challenges of the COVID-19 pandemic. At that time, the stock closed at 49,900 won, and it has not dipped below that mark since that date, even during sessions.
During Thursday's session, the stock showed a temporary rebound but ended up shedding further at the last minute, lowering the company's market cap to 298 trillion won ($212.78 billion). Considering that Samsung's stock was trading at around 88,000 won in August, its value has nearly halved over the past four months.
To blame is the Trump administration's stance against incentives related to the CHIPS and Science Act.
Samsung Electronics is set to receive $6.4 billion in subsidies under the CHIPS Act for its new plant in Texas, and SK hynix will also get $3.87 billion in incentives in support of its planned semiconductor packaging facility in Indiana.
"After Trump's victory, the semiconductor sector is facing concerns over a revision to the CHIPS Act and toughened regulations against China-bound semiconductors," Daishin Securities analyst Shin Seok-hwan said.
"If Trump reduces or delays CHIPS Act subsidies, domestic memory chip firms may have to scale back their U.S. investments, and the planned operation timelines for their U.S. fabs could also be postponed."
A general view of the Samsung Austin Semiconductor plant in Taylor, Texas, April 16. AFP-Yonhap
During his campaign, Trump attacked the act, arguing that increased tariffs would attract chip companies for free, stoking fears that the new administration may roll back the CHIPS Act. Though U.S. experts expect that the act will likely survive the Trump presidency, at least some changes are expected in the law's application guidelines.
This uncertainty will likely last until Trump officially takes office on Jan. 20 and unveils his administration's chip policies.
“The recent downturn in the Korean stock market is a combination of uncertainty surrounding Trump's policies and concerns over semiconductor earnings,” NH Investment & Securities analyst Na Jeong-hwan said.
“And the uncertainties will be addressed after the Trump administration reveals its tariffs or chip regulations against China, and investors may need to respond by avoiding the Trump risk.”
While the Trump risk may have amplified concerns over Samsung Electronics, what triggered the current slump are doubts on the company's fundamental competitiveness.
Samsung Electronics' stock price began to show a sharper decline as the company announced its third-quarter earnings last month. Despite posting an operating profit, the earnings showed that the company is falling behind its rival SK hynix in high-bandwidth memory (HBM), an advanced DRAM chip that powers AI processors, while its foundry business is posting losses.
This was coupled with criticisms on the company's corporate culture that undermines cooperation between its own business divisions, resulting in news articles alleging the company's “crisis.”
“While multiple factors have impacted Samsung's stock price, broader industry shifts are likely not the main reason for the company's sharper fall compared to its competitors,” Kiwoom Securities analyst Park Yu-ak said.
“It appears that the market is having doubts on two issues — the HBM technology gap that Samsung has been unable to close, and the pressure from China catching up in the general-purpose DRAM segment… The most urgent priority for Samsung's recovery appears to be restoring the core competitiveness of its DRAM business.”