Korean Semiconductor Industry in 1999 Onwards
H. Y. Kim, Contributing Editor -- Semiconductor International, 2/1/1999
Since the typhoon of the International Monetary Fund (IMF) hit the South Korean Peninsula in December 1997, the semiconductor industry in Korea has been more seriously affected than any other industry. Even before the IMF hit, the semiconductor industry had been affected by the price drop of DRAMs, which are the major products of three Korean manufacturers.
There were several occurrences in the Korean semiconductor industry mainly due to terms and requests of IMF, which influenced the Korean government to withhold funding to the semiconductor and automobile industries. As a result, Hyundai Electronics had to cancel a new project in Scotland; LG Semiconductor had to do the same in Wales, while Dongbu Electronics had to put its new 256 Mb DRAM joint project with IBM on hold.
Further influenced by the IMF, the government asked Hyundai and LG to merge as soon as possible, which delayed investment in a new facility to develop and manufacture 256 Mb DRAM until the deal went through, amid expectations of maintaining position among competition.
Merger deal between Hyundai and LG
| Seoul Showcase SEMICON Korea 99 | |
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Maria Lester, Associate Editor Korea represents 12% of the worldwide semiconductor materials and equipment market, which serves 8% of the world's total production. It is no wonder then that SEMICON Korea 99 is the largest international conference and exhibition in Korea for semiconductor equipment, materials and services. This year the main event will take place Feb. 22-24 at the COEX Convention Center (Seoul, Korea). Approximately 500 companies will have their equipment and services on display. Exhibition hours are 10 a.m.-5 p.m. Feb. 22-23 and 10 a.m.- 4 p.m. Feb. 24. In conjunction with the exhibition show, special events, technical programs, worldwide semiconductor industry market seminars and the SEMI Standards meeting will take place. The SEMI Standards meeting will be held on Feb. 24 in the Orientation Room, 3rd floor. It provides a forum for feedback and discussion among industry representatives. In particular, guidelines on 300 mm will be introduced. Also, the International Press Conference will be held Feb. 22 from 11 a.m. to 12 p.m., and the International Reception at the Grand Ballroom, Intercontinental Hotel (Seoul) will run from 6 to 8 p.m. The reception provides a relaxed atmosphere to socialize with representatives from around the world. You can
access more information about SEMICON Korea from the SEMI web site at www.semi.org. | |
Hyundai and LG spent a lot of their time negotiating the terms and conditions of this merger. In the meantime, in the very last part of 1998, Samsung decided to complete its ninth fabrication facility for 64 Mb DRAM by the first half of this year, so it can maintain its leading position in the memory device market. According to an industry authority, Samsung may start a new facility, its 10th fab, or expand its Austin, Texas, factory soon.
The final decision was made at the end of 1998. Hyundai was named by a U.S. consulting firm, Arthur D. Little, as the winner for the controlling stake of the merger. Even though there will be many difficulties to overcome, the fact remains that this new semiconductor entity will be the second largest player in the DRAM market. By this merge, the Korean government and the industry authority think that they can save up to $2.5 billion of duplicated investment on R&D, royalties and expenses for patents.
Most Japanese DRAM manufacturers already decided to step out from DRAM production as U.S. manufacturers did before because of low profitability and serious competition caused by a surplus in supply. Many also thought Korean DRAM manufacturers would face the same problems within five years because of strong challenges from the Taiwan semiconductor industry. However, thanks to the IMF, Korean manufacturers could slim down by reforming, restructuring, large numbers of layoffs and salary cuts by almost 40%. Further, they could introduce new chips, called fourth generation products of DRAM with an advanced design of 0.22 µm, which made their products more competitive and profitable.
People think that the IMF brought the Korean semiconductor industry a gift that will allow the Korean semiconductor industry to enjoy its leading position in the DRAM market for another 10 years.
1999 production and export
The export of Korean semiconductors in 1998 reached $13.5 billion, 5% lower compared to the same period in 1997.
However, the Korean Semiconductor Industry Association (KSIA) forecasts that the total export in 1999, including those by assembly and packaging firms, is expected to reach $18.2 billion, an 11% increase over 1998 (see Tables 1 and 2).
| Table 1. Forecast of Production for 1999 | |||||||
| (Unit: $1 million) | 1997 | 1998 | 1999 (Forecast) | ||||
| January- October |
Total (E) | Increased rate | Total | Increased rate | |||
| Production | Memory | 8016 | 5101 | 6400 | -20.2% | 7100 | 10.9% |
| (DRAM) | 7169 | 4312 | 5500 | -23.3% | 6200 | 12.7% | |
| Non-memory | 1697 | 1040 | 1200 | -29.3% | 1300 | 8.3% | |
| Total | 9713 | 6141 | 7600 | -21.7% | 8400 | 10.5% | |
| Table 2. Forecast of Export for 1999 | |||||||
| (Unit: $1 million) | 1997 | 1998 | 1999 (Forecast) | ||||
| January- October |
Total (E) | Increased rate | Total | Increased rate | |||
| Exported | Memory | 7520 | 4827 | 5900 | -21.5% | 6500 | 10.2% |
| (DRAM) | 6778 | 3783 | 5000 | -26.2% | 5700 | 14.0% | |
| Non-memory | 1106 | 733 | 900 | -18.6% | 1000 | 11.13% | |
| Subtotal | 8626 | 5560 | 6800 | -21.27% | 7500 | 10.3% | |
| Assembly & others | 8798 | 8032 | 9600 | 9.1% | 10,700 | 11.5% | |
| Total | 17,424 | 13,592 | 16,400 | -5.9% | 18,200 | 11.0% | |
Because of the recession in the semiconductor industry and IMF effects, the equipment and materials industries in Korea were in a serious recession as well in 1998. There was almost no new investment from device manufacturers in Korea in 1998 except by Samsung near the end of the year. However, as new investment by device manufacturers is expected this year, a significant number of new requirements for equipment and materials is expected. A total of $2.2 billion in requirements for semiconductor equipment is expected this year.
Much front-end wafer fab equipment has been manufactured in Korea by foreign manufacturers in Korean-based plants, including implanters and etchers by Varian, Applied Materials and Lam Research; diffusion furnaces by Kokusai Electric and track systems and wafer probers by Tokyo Electron.
There are many joint ventures and technology tie-ups between foreign manufacturers and Korean firms to manufacture front- and back-end equipment: bonders by Esec and D.I., Taesuk and Toshiba; handlers by Aju System and Aetrium and wet stations by Hanyang and Sugai.
The utility-related industry in Korea has grown fast and has accumulated a lot of experience in constructing numerous wafer fabs in Korea during the past several years. Shinsung, Samwoo EMC, Kwangkunsa, Hae Kwang and Seokyung TSC are leaders in cleanroom materials supply and installation. Sungdo Engineering and Hanyang Engineering are doing most ultra-high purity piping work. Pyung chang, Samho and Apex have used only local suppliers and are transferring technologies to Taiwan and Singapore.
Local equipment and materials
Since 1989, the Korean government and semiconductor industry started combining efforts to use local equipment and materials suppliers.
The government allocated a big piece of land to the semiconductor-related industry to encourage it to speed up the localization of related equipment and materials. As a result, a large industrial park was formed, called Chonan Semiconductor Industrial Estate, where both local and many foreign manufacturers put up facilities. Applied Materials, Songwon Edwards, Korea DNS, Kokusai Electric, Esec Korea, Lam Research and MRC set up plants in the estate and have been successfully operating.
Through this effort, the supply of localized materials this year, according to KSIA, is expected to reach up to 58% of its requirement, totaling $1.35 billion.
However, localization of front-end equipment has been rather slow, and only 1.5% of the total requirement, totaling $300 million, is expected this year.
In the meantime, many local Korean materials manufacturers have been exporting products to other countries: Tai wan, Singapore, Malaysia, Thailand and the Philippines. Many are enjoying lead positions in these areas with qualified products and competitive prices. For example, among the precision mold and spare parts manufacturers, Hanmi Mold is strong in the Malaysian market, and Kukje Mold is strong in Thailand, while Sungwoo Micron maintains a high reputation in the Philippine market with its own manufacturing plant in Manila. Atto and Hanyang Technology have become the major suppliers of gas cabinets in the Asian market. Sungdo Engineering expanded its activity to Malaysia, Singapore and Taiwan by establishing joint ventures in each territory to serve customers with qualified technology in ultra-high purity piping installation. Shinsung, the largest cleanroom contractor in Korea, has been performing many contracts in Southeast Asia by teaming up with Korean cleanroom material manufacturers. Dongjin Chemical has been exporting its molding compound to the assembly industries outside of Korea. Similarly, Mirae Industry has been manufacturing and exporting test handlers to customers world-wide.
Many other local manufacturers of semiconductor equipment and materials in Korea continue to develop products that meet customers' requirements.
One step higher and further
For the Korean semiconductor industry, 1999 looks bright. As forecasted by KSIA, the price of 64 Mb DRAM early this year may drop down to $7-8 because of seasonal low demand and mass production of fourth generation chips. However, WSTS forecasts that the DRAM market in 1999 will increase by 13% to $14.6 billion, by 26% to $18.4 billion in 2000 and by 28% to $23.7 billion in 2001. This forecast is based on the fact that the market for personal computers is expected to continue to grow by 13% to 16% annually, and the requirement from the fast-growing internet and communications industries is expected to be increased continuously.
Samsung, as a leader in the DRAM market, is expected to continue to invest in new facilities for 256 Mb DRAM as well as for facilities for 12 wafers. The merger between Hyundai and LG will possibly jump start Hyundai's Scotland facility again this year, while LG will put greater concentration on LCD display production at its former Wales facility. According to an industry authority, there is a strong possibility that one of the existing local device manufacturers will buy the facility of Dongbu Electronics.
All Korean semiconductor device manufacturers will try to diversify their products from DRAM production so that they can be general semiconductor manufacturers as well.
There is little doubt that 1999 will be the year for the Korean semiconductor
industry to jump one step higher and further. 
