Korean semiconductor supply-chain conditions are strengthening, with equipment, substrate, testing, and HBM data collectively supporting a positive view

Overview

The report examines memory capital expenditure, AI hardware demand, and supply constraints through 2Q26 results and corporate interviews across Korea's front-end equipment, substrate/CCL, chip-testing, and HBM supply chains. Goldman Sachs sees positive signals across all four value chains, further supporting its positive view on Samsung Electronics, SK Hynix, and SEMCO.

Core views

The report first observes accelerating capital expenditure by memory manufacturers through the front-end equipment segment. The nine major Korean equipment companies generated combined 2Q26 revenue of W1,716,498mn, up 20% yoy and 16% qoq; operating profit was W296,670mn, up 42% yoy, with an operating margin of 17%. Order backlogs increased significantly in 2Q26. Interviewed companies generally indicated that DRAM/HBM fab schedules had been brought forward and NAND technology upgrades had accelerated, prompting customers to request earlier delivery. Companies were broadly optimistic about orders and earnings in 2H26 and 2027 and guided for 25%-40% yoy revenue growth this year. Korean WFE imports increased 73% yoy in 2Q26 and 97% yoy in July 2026, further corroborating equipment demand; meanwhile, Korea's WFE exports to China declined 20% yoy through July 2026, which the report attributes to semiconductor equipment localization in China. Goldman Sachs expects capital expenditure at Samsung Electronics and SK Hynix to increase 59% and 75% yoy, respectively, this year, but the additional spending will remain insufficient to resolve memory shortages quickly: DRAM shortages are expected to reach 5.0% and 5.9% in 2026 and 2027, respectively, while NAND shortages are expected to reach 4.4% and 4.6%. Equipment spending currently focuses on DRAM, while companies are also positive about investment in NAND process upgrades. Most equipment suppliers have not yet encountered broad capacity constraints, but utilization rates continue to rise, with some manufacturers approaching full capacity and considering expansion. The industry has not broadly raised prices, although some suppliers have begun discussing price normalization. Delivery lead times remain largely unchanged for most equipment suppliers, while a few companies are seeing longer lead times. Based on process-node migrations, fabs under construction, and long-term fab construction plans, the report expects memory WFE capital expenditure to grow 47%, 47%, and 38% yoy in 2026, 2027, and 2028, respectively. As of the end of 2Q26, construction progress at SK Hynix's first Yongin fab stood at 61%, while Samsung Electronics' P5, P4 PH4, and P4 PH2 had reached 27%, 57%, and 23%, respectively, providing a project foundation for medium- to long-term equipment demand. The substrate and CCL segment is characterized by robust demand, product-mix upgrades, and tight supply. The six major Korean substrate/CCL companies generated combined 2Q26 revenue of W2,395,215mn, up 44% yoy and 11% qoq; operating profit was W421,405mn, with the operating margin reaching 18%. According to the report, higher shipment volumes and improved average selling prices driven by a greater proportion of high-value products jointly supported earnings growth. All tracked substrate companies recorded triple-digit yoy growth in 2Q26 order backlogs. Interviewed companies generally increased capacity utilization and are expanding or evaluating additional capacity. Goldman Sachs expects the ABF substrate shortage rate to widen from 8% in 2026 to 34% in 2027 and 51% in 2028. Against a backdrop of tightening supply and rising raw-material costs, multiple companies raised prices between March and June, while some also plan to broaden the range of products subject to price increases. Substrate/CCL companies expect revenue to grow 40%-50% yoy this year, accompanied by substantial margin improvement. This view is consistent with Goldman Sachs' forecast for SEMCO: revenue from its substrate business is expected to increase 51% yoy this year, while its operating margin rises 10 percentage points from 6% to 16%. Demand spans AI accelerators, 800G switches, automobiles, GDDR7, SSD controllers, and optical modules. Simmtech stated that SOCAMM demand was growing faster than initially expected and raised its related full-year revenue guidance by more than 50% from the beginning of the year. Goldman Sachs expects SOCAMM demand to grow 420% yoy this year and reach 7% of global DRAM demand. Some companies noted that tight supplies of raw materials such as T-glass had lengthened delivery lead times, although not yet to an extent that affects profitability. The chip-testing segment also has positive implications for the memory value chain. ISC's 2Q26 revenue and operating profit increased 41% and 55% yoy, respectively, while AI revenue grew 71% yoy and its share of total revenue increased from 67% to 81%. Demand was strong for server CPU, HBM, and other memory test sockets, and customers were even willing to accept higher prices and sign long-term agreements to secure capacity. ISC plans to expand capacity to 2.5 times its current level by 2029 and expects revenue of W310bn, W440bn, and W500bn this year, next year, and the following year, respectively, with an operating margin in the mid-30% range this year. Leeno Industrial's 2Q26 revenue and operating profit increased 27% and 38% yoy, respectively, supported by the peak season for smartphone chip testing and higher socket prices resulting from specification upgrades, while AI and servers emerged as new sources of demand. Techwing's 2Q26 revenue increased 16% yoy and operating profit rose 97% yoy. Orders for memory-test handling equipment increased rapidly, customers requested shorter delivery lead times, and the company expects 3Q26 performance to exceed both 1Q26 and 2Q26. Doosan Tesna achieved a yoy turnaround to operating profit in 2Q26, with resilient ADAS chip-testing demand, and expects AI chip-testing revenue contributions to begin in 4Q26. Based on this, Goldman Sachs believes Samsung Foundry's operating losses are narrowing and expects it to turn operating-profit positive in 2H27. However, some testing companies remain concerned about persistently weak smartphone demand. Finally, 2Q26 results, guidance, and commentary from HBM supply-chain companies were all relatively optimistic. Combined with recent industry data, Goldman Sachs expects the total addressable HBM market to grow 67% yoy this year and 108% yoy next year, further reinforcing its positive view on the memory companies under its coverage.

Analysis framework

The report first compiles 2Q26 results from 20 uncovered Korean supply-chain companies, then uses management meeting feedback from 14 of them to verify order, delivery, capacity, pricing, and demand trends. It subsequently combines import and export data, capital expenditure, fab construction, supply-demand gaps, and downstream application data to map supply-chain changes to Samsung Electronics, SK Hynix, and SEMCO.

Methodology notes

• Industry/value-chain analysis frameworkUpstream, midstream, and downstream value-chain transmission

  Mapping supply-chain performance

  The report uses the performance and operating commentary of equipment, substrate, testing, and HBM suppliers to assess how changes in upstream orders and capacity affect memory manufacturers and SEMCO.

• Industry/value-chain analysis frameworkSupply-demand framework

  Memory and ABF substrate supply-demand gaps

  The report measures supply tightness using shortage rates for DRAM, NAND, and ABF substrates and uses them to explain changes in capital expenditure, capacity expansion, pricing, and margins.

• Industry/value-chain analysis frameworkVolume-price decomposition

  Decomposition of shipment volume, product mix, and average selling price

  Growth in substrate/CCL performance is decomposed into demand-driven shipment growth and improvements in average selling prices resulting from a higher proportion of high-value products and price increases.

• Cycle and business conditions frameworkBusiness-cycle inflection-point analysis

  Order backlogs and accelerated deliveries as leading indicators

  The report views the rapid increase in 2Q26 order backlogs, customer requests for earlier delivery, and higher capacity utilization as leading indicators of earnings improvement in 2H26 and 2027.

Asset mapping & comparison

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

• Samsung Electronics

  Equipment suppliers' order growth and accelerated deliveries reflect active memory capital expenditure, while chip-testing data also indicate that losses in its foundry business may continue to narrow.

  Strengths

  Capital expenditure is expected to increase 59% yoy this year, with multiple fabs under construction; Samsung Foundry is expected to turn operating-profit positive in 2H27.

  Weaknesses

  The report expects the additional capital expenditure to remain insufficient to resolve DRAM and NAND supply shortages quickly.

  Comparison

  Expected capital expenditure growth is below SK Hynix's 75% but still reaches 59%.

• SK Hynix

  Accelerated DRAM/HBM production-line schedules, testing demand, and HBM market expansion all have positive implications for its memory business.

  Strengths

  Capital expenditure is expected to increase 75% yoy this year; construction progress at the first Yongin fab reached 61% as of the end of 2Q26; the total addressable HBM market is expected to grow rapidly.

  Weaknesses

  Despite the substantial increase in capital expenditure, the report still expects persistent tightness in DRAM and NAND supply.

  Comparison

  Its expected capital expenditure growth exceeds Samsung Electronics' 59%.

• SEMCO

  The widening ABF substrate supply gap, growth in AI revenue, and industry pricing environment are expected to drive growth and profitability improvement in its substrate business.

  Strengths

  Substrate business revenue is expected to increase 51% yoy this year, with its operating margin rising from 6% to 16%.

  Weaknesses

  The substrate value chain faces tightening raw-material procurement and longer delivery lead times.

  Comparison

  Its forecast is consistent with the Korean substrate/CCL industry's overall annual revenue growth guidance of 40%-50% and is slightly above the upper end of that range.

  Risks

  Tight raw-material supply may affect deliveries, while some industry companies also face customer concentration risks.

Key data

• Research scope20 companies; 14 of them participated in research meetingsCovering front-end equipment, substrates/CCL, chip testing, and the HBM supply chain
• Combined 2Q26 revenue of nine front-end equipment companiesW1,716,498mnUp 20% yoy and 16% qoq
• Combined 2Q26 operating profit of nine front-end equipment companiesW296,670mnUp 42% yoy, with a 17% operating margin
• Equipment companies' annual revenue guidance+25%-40% yoyPrimarily driven by strong WFE demand
• Annual capital expenditure growth at Samsung Electronics and SK Hynix+59%/+75% yoyGoldman Sachs' forecasts for this year
• Memory WFE capital expenditure growth+47%/+47%/+38% yoyCorresponding to 2026, 2027, and 2028, respectively
• DRAM supply-demand gap5.0% shortage in 2026; 5.9% shortage in 2027Supply remains tight even after capital expenditure growth
• NAND supply-demand gap4.4% shortage in 2026; 4.6% shortage in 2027Investment in process upgrades has not yet fully resolved the shortage
• Korean WFE import growth2Q26 +73% yoy; July 2026 +97% yoySupports the view of strong Korean memory-equipment demand
• Korean WFE exports to China2026 through July -20% yoyThe report attributes this to equipment localization in China
• ABF substrate shortage rate8%/34%/51%Corresponding to 2026, 2027, and 2028, respectively
• SEMCO substrate business forecastRevenue +51% yoy; operating margin rising from 6% to 16%Operating margin is expected to increase by 10 percentage points this year
• SOCAMM demand forecast+420% yoyExpected to account for 7% of global DRAM demand this year
• ISC 2Q26 AI businessAI revenue +71% yoy; revenue contribution rising from 67% to 81%Reflects strong production demand for AI computing products
• Samsung Foundry earnings inflection point2H27Goldman Sachs expects operating profit to turn positive by then
• Total addressable HBM market growth+67%/+108% yoyCorresponding to this year and next year, respectively

Impact & implications

Equipment order backlogs, accelerated deliveries, and capital expenditure growth support the outlook for memory investment and demand at Samsung Electronics and SK Hynix. Persistent shortages of DRAM, NAND, and ABF substrates reinforce the rationale for capacity expansion, price increases, and margin improvement. For SEMCO, growth in AI-related revenue and tight substrate supply are expected to drive substantial increases in substrate business revenue and operating margin. Strong feedback from the chip-testing and HBM supply chains also supports the view that memory and AI computing demand remain in an expansion phase.

Risks

• Korean equipment manufacturers that also operate display-equipment businesses cite weak display demand as a risk.
• China's promotion of semiconductor equipment localization may weaken the sustainability of long-term orders from China for Korean equipment companies.
• Substrate/CCL companies face risks from tightening procurement of raw materials such as T-glass and longer delivery lead times.
• Some substrate/CCL companies derive a concentrated share of revenue from specific customers.
• Some chip-testing companies are concerned about persistently weak smartphone demand.