SK expands semiconductor business

Competition between local semiconductor vendors SK and Samsung is heating up amid an unprecedented boom in the memory chip market.

In addition, it is likely to get fiercer as global semiconductor revenue is forecast to grow by more than 7 percent this year, according to a U.S. research and advisory firm.

SK, the nation’s third-largest conglomerate, is attempting to beef up its presence in the sector.

On Monday, SK Holdings, the holding company of SK Group, announced its plan to buy a controlling stake in silicon wafer manufacturer LG Siltron for 620 billion won ($531 million). The takeover is expected to rev up vertical integration of its semiconductor business surrounding SK hynix, the world’s second-largest memory chipmaker.

“Considering Chinese chipmakers’ preference for LG Siltron over Japanese rivals, there is a brighter outlook for SK hynix’s business expansion in the future,” said Kim Kyung-min, an analyst at Daishin Securities.

Setting the chip-making industry as a future growth engine, SK has established its business portfolio regarding materials for semiconductor production after acquiring Hynix Semiconductor in 2011.

Ahead of the Siltron deal, the group bought OCI Materials, a local manufacturer of special gases used in making chips, LCDs and solar panels, for 482 billion won in 2015. It also took over SK Airgas, an industrial gas manufacturer.

In line with the moves, SK hynix is reportedly considering a joint venture with U.S.-based data storage company Seagate as part of its plan to bolster its presence in the NAND market.

In addition, the chipmaker plans to invest 2.2 trillion won to build a plant in Cheongju, North Chungcheong Province, by 2019 to meet growing demand for more storage in mobile devices and computers.

SK’s continued efforts seem to pay off as SK hynix’s operating profit in the fourth quarter of last year is highly anticipated to top 1 trillion won, of which the report is slated for today.

As for Samsung Electronics, the world’s top memory chipmaker plans to fast shift to 10-nano DRAM chips while increasing investments for product diversification and expanding investments in the non-memory chip sector, amid a forecast that it may reach 10 trillion won in operating earnings in the first quarter of this year.

Samsung is also expected to focus more on NAND flash chips as its market is expected to see higher growth this year.

Along with its plants in Giheung, Gyeonggi Province, and Xian, China, Samsung will open a new chip plant in Pyeongtaek midway through the year ― although the plant’s production capacity remains unknown.

In the non-memory chip area, Samsung will supply chipsets, known as “Exynos,” for an in-vehicle infotainment system to Audi, allowing drivers to enjoy a variety of audio, video and navigation services through GPS.

Making the situation even better, Gartner forecast earlier this week that worldwide semiconductor revenue will total $364.1 billion in 2017 ― an increase of 7.2 percent from 2016. Last year, the market saw a 1.5 percent growth.

“The worst is now over with a positive outlook emerging for 2017 driven by inventory replenishment and increasing average selling prices in select markets, particularly commodity memory and application-specific standard products,” it said.

However, some critics warn that the chip market boom may be short-lived as Chinese companies are expected to surge around 2019, calling for the government to nurture players in the non-memory chip sector that they believe could give more opportunities to less-affluent entities and create jobs.

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