South Korea's Tech and Beauty Sectors: Riding Resilience to Recovery

The political turmoil of late 2024 and early 2025—marked by impeachment, leadership vacuums, and martial law—shook South Korea's economy. Yet, amid the chaos, two sectors emerged as beacons of resilience: the tech-driven semiconductor industry and the globally expanding K-Beauty market. As stability returns, investors are poised to capitalize on undervalued champions like SK Hynix in AI chips and innovative beauty brands like PharmaResearch and Classys, which are leveraging domestic expertise and global demand. Here's why these sectors are primed to rebound—and why now is the time to act.

The Tech Sector: From Crisis to AI-Driven Leadership

The semiconductor industry, led by SK Hynix, has turned political instability and tariff threats into opportunities. Despite the U.S. imposing a 10% tariff on South Korean imports, SK Hynix's advanced high-bandwidth memory (HBM) chips—critical for AI infrastructure—are driving record profits.

The company reported a 158% YoY jump in Q1 2025 operating profit to $5.2 billion, fueled by AI demand. Its HBM3E chips, used in data centers and autonomous vehicles, are booked solid through 2025, with HBM4 prototypes already in testing. SK Hynix's strategic move to secure $43.87 billion in U.S. CHIPS Act funding for a new Indiana plant further insulates it from tariffs.

Why Invest Now?
- Undervalued Metrics: SK Hynix trades at a 4.5x P/E ratio—40% below its 10-year average—and a 4.2x P/B ratio, despite holding 36% of the global DRAM market.
- Global Demand: The AI boom is structural, not cyclical. SK Hynix's HBM sales are fully contracted through 2025, and its U.S. localization ensures supply chain resilience.

Recommendation: Buy SK Hynix stock or semiconductor ETFs (e.g., SMH) before tariffs ease and Kospi rebounds.

K-Beauty: From Seoul to Sephora—A Billion-Dollar Shift

While tech firms navigate tariffs, K-Beauty brands are conquering global shelves. South Korea's cosmetics exports hit $10.28 billion in 2024 (+20.3% YoY), surpassing Germany, thanks to innovative startups and cultural influence.

Key Innovators to Watch:

1. PharmaResearch (Jung Sang-soo):

2. Its Rejuran, a salmon-sperm-derived skin booster, has made founder Jung Sang-soo a $1.2 billion billionaire. Q1 2025 revenue rose 56% to $85 million, with plans to expand into Southeast Asia via CVC Capital's backing.

3. Classys (Jung Sung-jae):

4. Manufacturer of beauty devices like the Ultraformer MPT, a non-invasive skin-tightening tool. Post-Bain Capital's $560 million investment in 2022, Classys now operates in 80+ countries, with 67% of sales overseas.

5. Emerging Brands:

6. Tirtir (dark-skin-tones cushion foundation) and d'Alba (eco-conscious serums) are entering U.S. retailers like Sephora and Target, backed by a $27M government fund for beauty startups.

Why Invest Now?
- Global Reach: K-Beauty exports to the U.S. hit a record $10.2 billion in 2024, overtaking France. Brands like Olive Young are eyeing U.S. stores, while TikTok-fueled demand keeps momentum high.
- Margin Stability: Despite tariffs, brands are absorbing costs via profit margins (e.g., The Founders' Anua had a 30% operating margin in 2024).

Recommendation: Target K-Beauty ETFs (e.g., KWEB) or direct plays like AmorePacific, which owns Laneige and has partnerships with Amazon.

Strategic Shifts: Domestic Leadership, Global Demand

South Korea's recovery hinges on two pillars:
1. Tech Autonomy: SK Hynix's $14B Cheongju fab and CHIPS Act-funded U.S. plants ensure self-sufficiency in AI chips.
2. Beauty as a Soft Power Tool: The government's “Cosmetics Day” and stricter regulations on false advertising are boosting trust, while K-pop's global appeal drives demand.

Risk Factors:
- Tariff Volatility: A 25% tariff proposal could pressure margins, but SK Hynix's HBM dominance and localized supply chains offer buffers.
- Beauty Saturation: Brands like COSRX face flattening growth, underscoring the need for innovation (e.g., Grabity's science-backed hair care).

Conclusion: Act Before the Rebound

South Korea's tech and beauty sectors are undervalued but primed for growth. SK Hynix's AI chip leadership and K-Beauty's global expansion offer asymmetric upside as political stability returns. With Kospi trading at a 20% discount to its 2023 peak, now is the time to allocate:

• Tech: Buy SK Hynix (000660) or SMH.
• Beauty: Explore KWEB or direct plays like Classys and PharmaResearch via international funds.

The recovery is underway—investors who move first will capture the rebound.

Data as of July 2025. Past performance does not guarantee future results.