What is the foundry strategy of the world’s second-largest memory semiconductor manufacturer?

SK Hynix, the world's second-largest memory semiconductor, expands foundry business efforts

🟩SK Hynix’s foundry business

SK Hynix’s fund-raising business is conducted by SK Hynix System IC, a contract production subsidiary. At SK Hynix, the world’s second largest memory company after Samsung, the foundry business accounts for about 2% of its earnings.

SK Hynix Vice Chairman said it would “double the production capacity of the foundry.” We anticipate that there will be opportunities in the foundry business due to the prolonged shortage of semiconductors.

🟩 Causes of semiconductor shortages

Due to the global shortage of semiconductors, supply has not been able to keep up with the increase in foundry demand. This began when the automotive industry, which had become short of semiconductors at the end of 2020, increased the order volume in anticipation of a recovery in production, and its inventory ran out at once.

SK Hynix aims to leverage the previous-generation semiconductor memory manufacturing equipment to capture foundry demand for niche semiconductors such as display drives and power management.

🟩 Supply shortage of semiconductors of the old process

Demand for semiconductors handled by Intel in the U.S. and TSMC in Taiwan for cutting-edge processes at 5 ~ 10 nm continues to grow. On the other hand, demand for semiconductors made with processes such as 40 nm to 90 nm and technologies made more than 10 years ago is also growing.

Many semiconductor equipment manufacturers are busy responding to orders for 12-inch equipment used in advanced processes. As a result, the current situation is that it is difficult to reproduce the old generation of 8-inch equipment. In fact, even in the used equipment market, 8-inch devices have been unavailable for several years.

SK Hynix’s old-generation semiconductor foundry business is not being supplied as a market.

🟩 Aiming for high profitability with the old process & multi-product correspondence

Many of SK Hynix’s foundry manufacturing equipment is an obsolete 8-inch unit that has mass-produced semiconductor memory in the past. Although the production volume of chips is small compared to the current mainstream of 12 inches, it has advantages suitable for high-mix production. In addition, since depreciation has already been completed for facilities, profitability is also behind the strengthening of the business.

🟩 Further increase revenue through M&A

SK Hynix will also proceed with M&A to increase its production capacity. It intends to acquire Key Foundry, the same Korean foundry that was spun off from Magnachip. Key foundries also manufacture chips mainly on 8-inch wafers using the old manufacturing process.

🟩 Conclusion

SK Hynix will double its foundry business. Aim for monetization using old-generation processes.

There are many old-generation 8-inch factories in Japan, so it would be nice if we could use them strategically like SK Hynix.

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