South Korea's "storage twins" expand production; semiconductor equipment stocks surge in response, ASML hits a record high

South Korea's "storage twins" expand production; semiconductor equipment stocks surge in response, ASML hits a record high

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On June 29, South Korean President Lee Jae-myung presided over the "Three Major Super Projects" press conference, announcing that Samsung Electronics and SK Hynix will each build two new memory chip factories in the southwest of South Korea.

The news prompted semiconductor equipment stocks to surge. On Tuesday, ASML closed up 6.8% in Amsterdam, hitting a record high. In New York, Applied Materials closed up about 4%, and KLA closed up 8%.

The logic is simple: Four new wafer fabs from South Korea's two big memory giants mean a massive demand for lithography machines, thin film deposition equipment, and testing systems, whose main suppliers are exactly ASML, Applied Materials, and KLA.

This surge continued the strong performance of the semiconductor sector this year. In the first half of this year, the Philadelphia Semiconductor Index nearly doubled, with a second-quarter gain of over 86%, its strongest quarterly performance on record. However, volatility remains high—the index dropped 7.9% last week, its worst week since early April, then rebounded as investors returned to AI infrastructure-related stocks.

Susquehanna analyst Mehdi Hosseini remains optimistic on semiconductors, citing continued strong demand for the industry. Other institutions predict that by 2028, global annual spending on wafer manufacturing equipment will reach $250 billion.

Southwest Korea Memory Chip New Cluster

The core of this investment plan is to build a new memory chip cluster in southwest South Korea, with a total investment of about 800 trillion won (about $518 billion), aiming to double DRAM production capacity within five years. Samsung and SK Hynix will each build two factories, and the government will provide land, electricity, and water infrastructure.

At the same time, on June 29, Samsung also announced a separate, longer-term domestic investment plan: from 2026 to 2040, it will invest 245 trillion won in South Korea, of which about 210 trillion won (76%) will go toward semiconductors.

Goldman Sachs analyst Giuni Lee's team broke this down as follows:

  • 165 trillion won for existing wafer fabs and ongoing projects, including moving up the completion of Yongin Plant 6 from 2047 to 2040;
  • 40 trillion won for two new wafer fabs in Gwangju, which are the core of the southwest cluster;
  • 5.6 trillion won for a new HBM wafer fab in Chungcheong Province.

Goldman believes that if Samsung's domestic capex and R&D together account for about 80% of the consolidated total, and assuming an average annual growth rate of about 6%, domestic spending for 2026 to 2040 would be about 250 trillion won, which aligns with the official announcement. Therefore, Goldman considers that "this implied spending growth is not aggressive."

Capacity Will Double, but Actual Growth Is Much Milder than the Headline

Korean memory manufacturers have reiterated their target to nearly double DRAM wafer capacity by 2030, but a research report from Bank of America Securities analyst Simon Woo's team on June 29-30 poured cold water on this.

Doubling sounds aggressive, but the corresponding average annual compound growth rate is only about 15%. More crucially, if you factor in the shutdown of old fabs and longer production cycles for new-generation memory chips, the actual annual growth of operating wafer capacity will be below 10%, and net wafer growth by 2030 will see only single-digit percentage compound growth.

Bank of America Securities also notes that the new southwest cluster is far from the Seoul metropolitan area, requiring much greater infrastructure investment and is much harder to build than existing bases like Pyeongtaek and Yongin. The firm likens this to TSMC’s decentralized layout strategy in Tainan, believing this kind of capacity expansion away from core regions needs much longer preparation periods.

Considering infrastructure construction (at least 5 years) plus wafer fab buildings and capacity ramp-up (an extra 3 to 4 years), Bank of America Securities believes that the new cluster will realistically see meaningful mass production in no less than 8 to 10 years.

For the semiconductor equipment sector, the next key point is July’s earnings season. ASML will report results on July 15, followed by TSMC on July 16. Investors will focus on both companies’ latest guidance on capex for new fabs, which will directly affect equipment demand expectations.

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