SK Group is going to take over LG Group’s LG Siltron which is a wafer manufacturer and is speeding up process of vertical integration for major materials of semiconductors based on SK Hynix.
SK Holdings held a board of directors meeting on the 23rd and has decided to purchase 51% of LG Siltron’s shares, which are owned by LG Holdings, for $531 million (620 billion KRW). SK Holdings and LG Holdings are planning to sign off on a contract regarding trading of stocks after resolutions made from a board of directors meeting and finish off this whole process after going through necessary procedures as soon as possible.
LG Siltron is the only South Korean company that produces silicon wafers which are major basic material for semiconductor chips and was the fourth highest market shares holder in global markets for 300mm wafers in 2016. Its sales and operating profits in 2016 were $666 million (777.3 billion KRW) and $4.63 million (5.4 billion KRW) respectively.
“Semiconductor wafer industries are growing rapidly as miniaturization of semiconductor processes and expansion of lamination processes (3D NAND) are taking place according to recent innovation of ICT (Information Communication Technology) such as AI (Artificial Intelligence) and IoT.” said SK. “We expect lack of supplies and increase in selling price.”
If LG Siltron is incorporated to SK Group, it is predicted that amount of supply of wafers for SK Hynix will increase. In 2015, SK Hynix spent $351 million (409.1 billion KRW) to purchase wafers and it spent $304 million (354.9 billion KRW) in just three quarters of 2016. Because wafers are basic materials of semiconductors, purchasing price will increase if company sales increase.
“SK Hynix has been receiving wafers from Japan’s Shin-Etsu Chemical Co., Ltd. and SUMCO, SunEdison from the U.S., Germany’s Siltronic, and LG Siltron.” said a representative for this industry. “Percentage of procurement of LG Siltron’s wafers will increase as SK Group takes over LG Siltron.” However some are worried that amount of trading with customers that are competing against SK Hynix will somewhat decrease if LG Siltron is incorporated into SK Group. This indicates that establishment of vertical integration system can be a double-edged sword.
LG Siltron was formally Kosil, which was co-established by Dongbu Group and Monsanto in 1983. As LG took over management right of Kosil in 1990, its name changed to Siltron and eventually changed to LG Siltron in 2011. Owner of Siltron changed from Dongbu to LG and to SK.
By taking over LG Siltron, SK has established a business portfolio for semiconductor’s major material. SK entered semiconductor material business in 2016 by taking over SK Materials which is a semiconductor special gas manufacturer. SK Materials, which is the top company in the world in NF3, has been breaking its quarterly performance after being taken over by SK. It is estimated that its sales in 2016 are going to be about $394 million (460 billion KRW) and its sales and operating profits are expected to be increased by more than 30% from previous year. Afterwards SK took over SK Air Gas, which is an industrial gas manufacturer, in order to diversify its products and to enter global markets and established joint-corporations called SK TreeChem and SK Showa Denko. In second half of this year, SK TreeChem is going to start producing precursors. SK Showa Denko’s etching gas factories, which are the biggest etching gas production factories in the world, are also going to start mass-production in third quarter of this year.
Staff Reporter Han, Juyeop | powerusr@etnews.com