Korean semiconductor equipment and materials supply chain Report Interpretation

Overview

HSBC presents a Korean semiconductor equipment-and-materials supply-chain thesis: record equipment orders and rising memory-fab installations should drive an earnings acceleration from 2H26e, followed by material demand as wafer production ramps. The report maintains Buy ratings on six beneficiaries and highlights EO Technics and ISC as preferred picks.

Core views

HSBC argues that Korean front-end semiconductor process equipment (SPE) makers are at the start of, rather than near the end of, a memory-cycle upswing. The combined order backlog of four key front-end equipment companies reached KRW1.2trn at 2Q26, up 181% year on year and the highest level since 2017, exceeding prior-cycle peaks. The institution attributes this to firming global memory-maker capital-expenditure plans and stronger competitiveness of Korean domestic suppliers versus global peers, which it believes is enabling share gains and greater participation in advanced-process spending. In HSBC's view, backlog can continue expanding while global memory capex remains strong. The next step is revenue conversion. Equipment suppliers recognise revenue at tool move-in, and HSBC expects accelerating installations at the top three global memory makers to strengthen Korean suppliers' profitability from 2H26e and extend visibility through 2027-28e. It forecasts DRAM equipment move-ins of around 55-65k wpm per quarter in 2H26e, rising to about 65-100k wpm per quarter in 2027e. Estimated new DRAM capacity additions are 185k wpm in 2026e, 340k in 2027e and 395k in 2028e; the 2026e total includes approximately 120k wpm in 2H26e. HSBC sees this capacity path as support for equipment and materials growth over the following three years. Materials should follow the equipment cycle with a lag. HSBC estimates that materials demand typically inflects four to six months after move-ins, once wafers begin running. It expects Samsung Electronics and SK Hynix to ramp new domestic DRAM fabs from late 2026e to early 2027e, lifting demand for wafer inputs and consumables. For Hansol Chemical, hydrogen peroxide volumes scale with processed wafers, while 1c nm DRAM and 300-plus-layer NAND increase both cleaning steps and purity requirements. HSBC expects these factors to make consumption per wafer rise as well as volume; it forecasts Hansol's 2027e revenue to grow 17% and operating profit to grow 45%. New precursor qualifications at domestic DRAM customers from 2027e provide further optionality. Within front-end and back-end equipment, HSBC prefers EO Technics and ISC. For EO Technics, it expects 2026e growth led by laser marking, projected to rise 40% year on year as chiplet integration raises marking touchpoints per device from one to three to more than seven and shifts demand toward higher-value UV marking. Laser annealing and cutting are each expected to grow 25% and 40%, respectively, in 2026e. In 2027e, HSBC expects node migration, HBM4e and AI-accelerator substrate complexity to broaden growth: laser annealing is forecast to grow 60%, laser cutting 100%, and UV drilling revenue 120%, while marking growth normalises to 10%. These drivers underpin HSBC's forecast for EO Technics operating profit of KRW225bn in 2027e, up 59% year on year. ISC is HSBC's preferred back-end exposure because test sockets are consumed with test volumes rather than purchased as one-off capex, and the company has direct AI exposure. HSBC expects AI to account for 80% of ISC sales in 2026e. Larger GPU packages and interposers are expected to increase pin counts and socket average selling prices; it also expects price increases in memory and logic sockets from 3Q26e, a recovery in logic mix to 83% of sales, and shipments of a high-margin data-centre connectivity socket. HSBC expects wallet share at major customers to approach 50% by end-2026e from 30% in 2025, supported by competitiveness and capacity expansion from KRW270bn in 2025 to KRW320bn by end-2026e. It forecasts ISC operating profit of KRW105bn in 2026e, up 74% year on year at a 33% margin, then KRW149bn in 2027e, up 42% year on year at a 35% margin, as growth broadens from GPUs to ASICs and new form factors. HSBC maintains Buy ratings and unchanged target prices across its six highlighted Korean names. Its valuation work uses target PE multiples applied to forecast EPS, generally anchored to historical averages or cycle valuation references. The report's stated risks include weaker semiconductor capex, delays in capacity or equipment installation, slower node migration or advanced-memory adoption, market-share pressure, and company-specific risks such as currency, tariffs, raw-material costs and litigation.

Analysis framework

HSBC starts with disclosed front-end equipment backlogs and memory-capex trends, then links tool move-ins to equipment revenue and operating leverage. It applies a timing lag between move-ins and wafer starts to assess materials demand, and evaluates individual beneficiaries through product exposure, technology transitions, capacity expansion, customer penetration, earnings forecasts and forward PE-based target-price frameworks.

Methodology notes

• Industry AnalysisSupply-demand framework

  Memory capex, equipment backlog, tool move-ins, wafer capacity and wafer-input demand

  The report traces how stronger memory investment builds equipment orders, converts to equipment revenue at installation, and later raises materials consumption when wafer production begins.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Equipment move-in to wafer-start to materials-demand transmission

  HSBC distinguishes the immediate beneficiaries of tool installations from material suppliers, which it expects to benefit roughly four to six months later.

• Valuation methodsP/E and PEG Valuation

  Target PE multiples applied to forecast EPS

  For the covered companies, HSBC derives target prices by applying stated PE multiples, generally based on historical averages or upcycle references, to its forecast earnings.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• EO Technics (039030 KQ)

  Preferred Korean front-end and back-end SPE beneficiary of node migration, HBM-related process additions and advanced packaging.

  Strengths

  Laser marking, annealing and cutting provide multiple growth drivers; HSBC expects 2027e operating profit of KRW225bn, up 59% year on year.

  Comparison

  HSBC describes EO Technics as its preferred Korean SPE pick.

  Risks

  Downside semiconductor-manufacturing capex revisions, geopolitical or consumer-demand weakness, and delays in customer equipment installation.

• ISC (095340 KQ)

  Preferred back-end test-socket beneficiary of AI, GPU, ASIC and package-complexity growth.

  Strengths

  Recurring demand tied to test volumes, expected pricing and mix improvement, rising customer wallet share and capacity expansion.

  Weaknesses

  Foreign-exchange exposure because a high share of sales is in US dollars while production is mainly in Vietnam and Korea.

  Comparison

  HSBC calls ISC its preferred back-end name and the most direct AI test exposure in its coverage.

  Risks

  Korean-won appreciation, US tariff changes, and weaker memory or logic-foundry demand reducing socket sales.

• Hansol Chemical (014680 KP)

  Preferred materials exposure to rising memory wafer starts and higher cleaning intensity from advanced DRAM and NAND nodes.

  Strengths

  Hydrogen peroxide demand scales with wafer processing; advanced nodes increase consumption per wafer, with precursor optionality from 2027e.

  Comparison

  HSBC identifies Hansol as the most direct beneficiary among its covered materials companies.

  Risks

  Weaker quantum-dot TV demand, slower 3D NAND capacity ramp, delayed gains in new products and higher raw-material costs.

• HPSP (403870 KQ)

  Covered front-end equipment beneficiary of advanced-node investment.

  Strengths

  Exposure to advanced semiconductor-node technology and expected customer capacity expansion.

  Comparison

  Valued against global semiconductor-equipment peers with advanced-node exposure.

  Risks

  Lower global semiconductor equipment capex, new competition, slower node expansion, shipment delays and patent litigation.

• Wonik IPS (240810 KQ)

  Covered deposition-equipment beneficiary of DRAM, NAND and foundry investment.

  Strengths

  HSBC cites penetration in a key V9 NAND process step and sales opportunity from advanced NAND.

  Weaknesses

  Reliance on captive-customer investment patterns.

  Comparison

  Included among Korean equipment beneficiaries alongside global peers.

  Risks

  Slower 3D NAND migration, delivery delays, weaker customer investment and faster EUV commercialisation reducing deposition and etching steps.

• Park Systems (140860 KQ)

  Covered semiconductor metrology beneficiary of broader wafer-equipment move-ins and advanced applications.

  Strengths

  HSBC expects stronger proliferation of AFM at semiconductor customers and further move-ins for leading-edge applications.

  Comparison

  Included in HSBC's Korean equipment beneficiary set.

  Risks

  Lower global wafer-equipment capex, competitive share loss and slower front-end node expansion causing shipment delays.

Key data

• Korean front-end SPE backlogKRW1.2trn in 2Q26Combined backlog of four key makers; up 181% year on year and a record high since 2017.
• DRAM equipment move-insc55-65k wpm per quarter in 2H26e; c65-100k wpm per quarter in 2027eHSBC estimate for the top three global memory makers.
• New DRAM capacity additions185k wpm in 2026e, 340k wpm in 2027e, 395k wpm in 2028eIncludes approximately 120k wpm in 2H26e.
• Hansol Chemical 2027e forecastRevenue +17%; operating profit +45%HSBC expects wafer-start growth and higher chemical intensity per wafer to support growth.
• EO Technics 2027e operating profitKRW225bn, +59% year on yearDriven by broader annealing, cutting and UV-drilling growth.
• ISC operating profitKRW105bn in 2026e, +74% year on year; KRW149bn in 2027e, +42%HSBC forecasts margins of 33% in 2026e and 35% in 2027e.

Impact & implications

HSBC sees the memory upcycle broadening from front-end equipment orders and installations into wafer inputs, consumables and back-end test sockets. It expects technology migration, HBM and AI-related packaging complexity to reinforce the conventional memory-capex cycle, supporting multi-year earnings visibility for selected Korean suppliers.

Risks

• A reduction in global memory or semiconductor equipment capex could weaken backlog growth, installations and earnings.
• Delays in fab ramp-ups, customer tool installations, node migration or advanced-memory adoption could defer revenue conversion.
• Company-specific risks cited include competitive share pressure, tariffs, currency moves, raw-material costs and litigation.

What to watch

• Whether global memory capex and Korean front-end equipment backlogs continue to expand.
• DRAM tool move-ins in 2H26e and the pace of wafer-capacity additions through 2028e.
• The timing of Samsung and SK Hynix domestic DRAM-fab ramps from late 2026e to early 2027e.
• Adoption of advanced DRAM, 300-plus-layer NAND, HBM4e and AI-related packaging processes.
• ISC's customer wallet-share progress, pricing actions and capacity ramp toward KRW320bn by end-2026e.