Eugene Tech expects upward momentum from 3-D NAND memory

This is the 20th in a series of articles analyzing major companies by market capitalization traded on the tech-heavy Kosdaq market. – Ed 

As devices evolve quickly and consume more and more memory, chipmakers are rushing to expand their production of 3-D NAND, the latest high-density memory chip that stacks layers of storage cells like a skyscraper.

Eugene Technology, a 1.1 billion won ($978,000) local wafer process tool provider, stands to benefit from the trend. 

Established in 2000, Eugene Tech supplies chip-producing equipment and tools to the world’s leading semiconductor producers, including Samsung Electronics. Last year, it raised 94.7 billion won in total sales. Samsung and SK hynix were the two largest customers.

Eugene Tech’s product lines may sound strange to ordinary consumers: the BlueJay single thermal low pressure chemical vapor deposition system; Albatross plasma treatment; Phoenix plasma enhanced atomic layer deposition system; Falcon selective epitaxial growth system; and Hawk dry cleaning system for memory devices. 

The Albatross and Phoenix plasma systems are the company’s flagship products and can be found at Samsung’s memory-chip producing lines.

Share prices of Eugene Tech, traded on Korea’s secondary Kosdaq exchange, have remained strong on strong second-quarter results and prevailing expectations the earnings momentum will continue in the coming quarter.

Stocks rose to a new 52-week high of 22,700 won on Aug. 22 after the company posted a net profit of 9.5 billion won during the April–June period, thanks to high sales of the plasma system for 3-D NAND flash memory chips.

On Monday, Eugene Tech shares were quoted at around 20,250 won, sharply lower from the previous session as Korean stocks took a dive on heightened worries over a potential interest rate hike in the US. It closed at 20,100 won, down 8.22 percent from Friday.

“As Samsung chose to expand its 3-D NAND facilities, the Q3 performance is expected to fare pretty well,” said a senior marketing manager at the company. 

Analysts say the firm could see a jump of nearly 20 percent in profits in the next three months.

According to the memory chip industry, Samsung has decided to invest 2 trillion to 2.5 trillion won to enhance its Hwaseong 3-D NAND production line, betting on its supremacy in the NAND flash market with its competitive 64-layer 3-D NAND flash memory chips in the second half of this year.

“The 3-D NAND has been used for just servers and laptop solid-state drives so far, but it is forecast to be used for smartphone’s embedded multimedia cards from this quarter,” said Noh Geun-chang, an analyst at HMC Investment Securities.

“As smartphone-makers are expected to expand storage capacity of smartphones in line with growing demand for UHD and virtual reality contents, the demand for 3-D NAND process tools is projected to soar.”

Since the investment momentum for 3-D NAND seems likely to continue growing through 2018, the analyst raised the target price for Eugene Tech to 28,000 won.

Hwang Jun-ho, an analyst at Mirae Asset Daewoo, also raised its target price for Eugene Tech from 19,000 won to 25,000 won, citing the fast revival of the memory market.

“As DRAM prices rebounded in 18 months, the memory chip market is rapidly improving,” he said. “Samsung is currently producing 3-D NAND memory chips at the maximum capacity of its Xian plant, and is reportedly working to switch the 16 Line producing 2-D NAND memory chips to churn out 3-D NAND memory chips as well as the 17 Line.”

The analyst added the memory chip giant is planning to invest in the Pyeongtaek plant to produce 64-layer 3-D NAND memory chips next year.

“Such plans help raise expectations on sales of the company’s plasma treatment equipment,” Hwang said.

SK hynix is also considering a plan to expand its 3-D NAND production by increasing production lines at its Cheongju factory, he added. 

By Song Su-hyun (song@heraldcorp.com)