[Stock Information] LX Semicon, a Domestic Fabless Company

While it's predicted that the semiconductor industry will continue to attract attention this year, the situation for secondary battery-related stocks remains challenging. Tesla's performance is strong, but its share price is falling, which is also impacting secondary battery-related stocks.

In this article, we'll discuss LX Semicon, one of the domestic semiconductor companies.

First, let's look at the global semiconductor market. Broadly speaking, the semiconductor market is divided into memory semiconductors and non-memory semiconductors. Samsung Electronics and SK Hynix, which we often encounter, are companies that are active in the memory semiconductor market. CXL and HBM, which have been mentioned in many media outlets recently, are also, in a way, technologies limited to memory semiconductors. Currently, Korea's semiconductor industry is globally recognized, but it is still active only in the memory semiconductor market. Companies are well aware of this, and the government also understands this data. To diversify this business structure, it is necessary to advance into the non-memory semiconductor market, and fostering system semiconductor companies in the non-memory field is crucial. Currently, LX Semicon is the most technologically advanced system semiconductor company in Korea. LX Semicon is already a leading domestic company, having participated in the Semiconductor Exhibition held at COEX in Seoul in October 2023, where it showcased automotive and consumer electronics system semiconductors.

However, it's important to note that while LX Semicon is currently active in display-related panel technology, it has not seen much success in the automotive semiconductor market. On the other hand, thanks to the solid support of LG Display, its display-related panel technology is already at a world-class level. So, why should we pay more attention to LX Semicon? It's because the government's system semiconductor strategy is scheduled to be unveiled in February this year. The Ministry of Trade, Industry and Energy stated that the proportion of system semiconductors is very small, and they will announce a system semiconductor fostering strategy by February 2024. And there's a crucial point here: LX Semicon, as the leading company, is expected to receive the most attention when this fostering strategy is implemented. There is currently no other domestic company that can compete with LX Semicon. The quality gap in the domestic market is quite stagnant, but LX Semicon has already built up its technological prowess by signing contracts with numerous display companies, including LG Display. Furthermore, the Minister of Trade, Industry and Energy specifically mentioned the promotion of fostering in the fields of system semiconductor design houses and packaging. Based on these statements, it's necessary to pay more attention to LX Semicon, the leading system semiconductor design company, AD Technology, a design house specializing in design, and Hynix Micron, a packaging specialist.

Looking at the current status of LX Semicon, ironically, the company's stock price has been quite sluggish recently. This semiconductor company is not related to themes like CXL and HBM, and it doesn't have a strong connection to Apple's Vision Pro either. Due to these reasons, the stock price has fallen significantly, but I believe that this is the right time to pay attention to LX Semicon.

According to a Hi Investment & Securities report, LX Semicon recorded a significant improvement in performance in the fourth quarter of 2023 due to the effects of the new iPhone and a reduction in research and development expenses. Sales of DDIs, the core of the fanless company, also increased significantly. Therefore, long-term growth can still be considered solid, and the undervaluation due to excessive stock price declines is also attractive. While persistent weakness in demand continues, this issue is largely reflected in the stock price. Since this company is a fanless company, it is not related to LCD or OLED processes and can continue to supply related technologies. Therefore, while some decline in volume due to the entry of new fanless companies may occur, the company will continue discussions on transactions with Chinese-related companies. Thus, the future of this company has a greater potential for improvement, and the current recovery in operating profits is also steep.