Consolidation is inevitable in every industry, yet today saw the announcement that trumps numerous hyped or just rumored acquisitions made to pump up the stock in western media. SK Hynix just made recent moves by industry giants such as Intel ($16.6 billion acquisition of Altera), TSMC, or Micron (rumored sub-23 billion acquisition by the Chinese) – look small.
The company announced it will invest no less than 38.9 billion US dollars in a bid to become the world’s largest semiconductor manufacturer, a crown currently held by Taiwanese TSMC for logic chips and Samsung for DRAM/NAND memory chips. This investment is split into two parts, $26.9 billion to build two new semiconductor foundries by 2024. Second part is $12.7 billion currently being spent on its M14 foundry, accelerating production to 200,000 300mm wafer starts per month (wspm). This move will create significant production capacity glut, driving the prices down as customers have more and more choice.
SK Hynix is betting that themselves, LG and Samsung can lead the world semiconductor industry, taking more customers away from traditional powerhouses such as TSMC or GlobalFoundries. Korean company plans to offer ‘more than enough production volume’ and fulfill the proclaimed future demands of the IT market. The proclamation ceremony for future vision at its headquarters in Icheon by SK Hynix CEO Park Sung Wook. There were about 400 people attending, including distinguished guests and people like the Secretary Yoon Sang Jik (Ministry of Trade, Industry and Energy), Secretary Yoon Sung Kyu (Ministry of Environment), Assemblyman YooSeung Woo, Governor Nam Kyung Pil of Gyeongi-do, Governor Lee Si Jong of Chungcheongbuk-do Province, Mayor Cho Byung Don of Icheon, Mayor Lee Sung Hoon of Cheongju, President Kim Chang Gun of SK SUPEX, President Park Sung Wook of SK Hynix, and other important figures.
SK Hynix already won interesting manufacturing contracts, and currently packs the world’s most complex chip known as Fiji. AMD’s 8.9 billion transistor chip is manufactured at Taiwanese TSMC using the 28nm process, then gets shipped to South Korea, where it is joined together with revolutionary HBM memory.
This investment marks the first time in 18 years that a Korean company is building a 300mm production facility in South Korea (for example, Samsung’s flagship 300mm fab is located in Austin, Texas). While Hynix experienced a downfall due to the financial crisis and the slowing economy, purchase by SK Group in 2012 prepared the manufacturer to be ready to make an investment of this magnitude.
Set in the Icheon Headquarters complex (not to be confused with Incheon, where the main Korean airport ICN is located), the M14 foundry features a massive clean room, equivalent to 7.5 soccer stadiums. The main building measures at 66,000 m2, where the two-story Clean Room can start up to 200,000 300mm wafers per month (wspm). The older M10 facility starts about 120,000 to 130,000 300mm wafers per month. Thus, this $12.7 billion foundry will significantly increase the overall production numbers, making SK Hynix a viable attacker for the likes of TSMC, GlobalFoundries, Samsung and other players in the semiconductor business. While M14 will manufacture memory, plans for other two fabs bring SK Hynix inline with GlobalFoundries and Samsung, manufacturing semiconductor chips for fabless semiconductors such as Nvidia, Qualcomm or even Apple.
“We are thankful for government, local governments, communities, cooperative companies, and others that showed supports and concerns to successfully establish M14. Although it is difficult to foresee competition situation in the future, we are going to do our best to repay Korean citizens’ expectations and supports by strengthening medium and long-term competitive edge through continuous innovation and investment in people.” said Chairman Choi Tae Won of SK Group.
The impact on Korean economy should be amazing. This investment cycle will, proclaimed by the company earlier, directly provide approximately 53,000 jobs, making a total impact of 210,000 jobs. SK Group, SK Hynix representatives and government officials spoke of three fold impact on overall Korean economy due to the effect of this investment. Regardless of political boasting, no fabless semiconductor will be able to consider their next-generation parts without taking SK Hynix under serious consideration. The company management will be hungry for landmark deals, and they should be able to offer better prices than their competition.
In case you’re wondering how computer chips such as memory or logic processors are manufactured, it is a multi-week process, taking up to two months after wafer started its production (hence the measurement unit ‘wsmp’ – wafer starts per month), take a look at video below:
Sadly, given the manufacturing issues SK Hynix gave to its first landmark customer and partner – with apparent low availability due to problems in packaging, SK Hynix management will have to invest into supporting its customers and partners on a much greater scale than they do at present time.
Note: Mr. Nebojsa Novakovic from Singapore office and Mr. Theo Valich contributed to the report.