Samsung Electronics Co, the world's largest maker of memory chips, and three rivals were raised to "buy" by Merrill Lynch on higher-than-expected demand for chips that store data in computers and consumer electronics.
Shares of Samsung, Hynix Semiconductor Inc, Elpida Memory Inc and Powerchip Semiconductor Corp (
Memory chip sales will gain 8 percent this year and 14 percent in 2006, after an earlier projection for sales to shrink the next two years, Simon Woo, a Seoul-based Merrill analyst, wrote yesterday.
Merrill's upgrade on the industry is a contrast to other brokerages including UBS AG, which earlier this week cut its recommendations on Europe's largest chipmaker, Infineon Technologies AG, because of concerns about oversupply and falling semiconductor prices.
The Philadelphia Semiconductor Index, which tracks 19 chipmakers, has risen 8.1 percent this year.
"The market is definitely rebounding, but whether the current conditions will last remains a question," said Seiichiro Iwamoto, who manages about US$9.7 billion in stocks at Fuji Investment Management in Tokyo.
Shares of Suwon-based Samsung Electronics rose 0.9 percent to 554,000 won (US$ 539.68) and Ichon-based Hynix's stock gained 4.6 percent, its biggest advance in a month, in Seoul.
The two South Korean companies are the world's two biggest memory-chip makers.
Elpida, Japan's top memory-chip maker, surged 5.7 percent to ?3,330 (US$ 30.38), the biggest gain in four months, in Tokyo.
Hsinchu-based Powerchip, Taiwan's largest memory chip supplier, advanced 4.5 percent to NT$20.90, the biggest gain in almost two months.
Woo said other chipmakers, which make the benchmark computer chip known as dynamic random access memory, weren't upgraded because of their lower profit margins and valuations.
Shares of Infineon, Micron Technology Inc and Nanya Technology Corp (
While Japan's Toshiba Corp and Sunnyvale, California-based SanDisk Corp will also benefit from higher-than-expected demand for NAND flash chips, which store songs and pictures in digital cameras and MP3 players, they weren't upgraded because of their "rich" stock valuations, he said.
Shares of Hynix have more than tripled and been the best- performing stock among the world's top 20 semiconductor companies since Jan. 13, 2004.