South Korean Memory Chip Sector Continues to Weaken Amid Tightening Leverage Policies and Reassessment of AI Demand

On July 16, the South Korean memory chip sector continued to weaken, primarily due to a reassessment of the demand outlook for AI computing power and concerns over the industry cycle, compounded by South Korea's plans to tighten leverage trading policies. The memory chip industry exhibits significant cyclical characteristics; during periods of industry prosperity, manufacturers expand production capacity, which subsequently leads to a concentrated release of new capacity and a sharp decline in prices, resulting in overall industry losses. Meta's plan to lease idle computing resources has raised concerns about oversupply in AI infrastructure investment, and this sentiment has spread to the global memory chip sector, with leading companies such as SanDisk, Micron Technology, Seagate Technology, and Western Digital seeing their stock prices drop by more than 20% in recent weeks. U.S. President Trump stated that Micron plans to invest $250 billion in the U.S. to expand memory chip manufacturing to strengthen supply chain security. The risk appetite in the South Korean market is also influenced by policy factors, as the Bank of Korea announced a 25 basis point interest rate hike to 2.75%, marking the first increase since January 2023. The Korea Financial Investment Association revealed that large asset management institutions are discussing investor protection measures for individual stock leveraged ETFs, which may increase the margin requirements for leveraged chip ETFs to five times the current level, further exacerbating market caution regarding the funding situation in the chip sector.

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