Korea: Ready for Another Jump

Like other countries around the world, Korea has felt the effects of the downturn in the economy this past year, and its semiconductor and semiconductor equipment industries are no exception. But Korean manufacturers are working to expand production, forming joint ventures with overseas partners and preparing for a move to 300 mm production.

Sales at Anam Semiconductor (Buchon, Korea) are expected to have exceeded $182M last year, and Hynix Semiconductor (Ichon, Korea) began to recover its foundry sales from August. The latter is about to expand its monthly capacity to 20,000 200 mm wafers this year in spite of a rumor of being merged to a local consortium of ASIC developers.

While Hynix Semiconductor and Samsung Electronics (Seoul, Korea) are suffering from capital and sales fluctuations, new pure-play foundry provider Dongbu Electronics (Seoul) is moving ahead. Established in 2001 as the only pure-play foundry provider in Korea, this company recently succeeded in obtaining a syndicated loan. With capital coming in, Dongbu plans to expand its production capacity from 5000 to 20,000 200 mm wafers per month. Local financing corporations and institutional investors are willing to invest in Dongbu, in particular, because of its non-memory foundry services. This will help balance Korea's semiconductor industry, which has long been heavily dependent on DRAMs.

Two small transistor packaging companies are enjoying steady sales increases in spite of the recent terrorist attacks in the United States. With Fairchild as the largest client, they deal mainly with small-volume orders for diverse products. Meanwhile, a microcontroller producer has set up a plan to expand its capacity by more than 5× this year, catering to rising demands.

Flip-chip bumping services are gathering steam these days. With Microscale (Pyontaek, Korea) being a forerunner, Korean companies will diversify markets by going abroad. Microscale is capable of handling 300,000 200 mm wafers per year, focusing on LCD driver ICs with a maximum monthly output of 1.6 million units. The figure will be expanded to 2.5 million pieces this year.

Japan will be the company's first global market this year, and it will diversify into solder-bumping and PCB-bumping services. "Bumping, testing and assembly all take place under one roof of our factory so we can offer a short service/delivery time at competitive costs," said Kyu-Sung Hwang, president and CEO. "We are mostly targeting LCD-driving ICs, which require a bumping process. We will move to mobile handset devices this year."

According to Hwang, the world's first three-service policy (which includes module assembly) is a strong market force against Taiwanese rivals, which offer the services one by one. The Au-Au interconnect (AAI) flip-chip bonding to Au-stud-bonded devices highlights the total flip-chip solution provider's assembly service.

Cooperative development and marketing is likely to continue this year. With the most successful case coming from Korea Digital Neo-Tech System (KDNS, Cheonan, Korea), this kind of strategic business will be expanded to semiconductor and display industries of Korea. KDNS shipped $4M worth of LCD production equipment late last year to China. "This was the second case of shipping STN-LCD equipment export, following the $5M volume shipment to Nanya, Taiwan, early last year," said C.H. Park, president of KDNS. "This year's LCD equipment sales will be more than $32M, and we are now waiting for orders for 300 mm wafer processing equipment such as wet stations and tracking systems."

As 300 mm wafer production gets ready to ramp up, wafer supplier LG Siltron (Seoul) is in full readiness to launch mass production, starting in the second half of this year. To this end, the company is building a production line capable of 100,000 300 mm wafers per year to compete with two Japanese rivals.

Korea's semiconductor equipment manufacturers have a bright prospect for sales this year. Hynix is expected to settle its payments for equipment it has purchased from local manufacturers as it collects the capital it needs for survival. Equipment manufacturers are also counting on Samsung Electronics to invest in LCD equipment this year.

Leading equipment manufacturers are investing heavily in R&D in preparation for the 300 mm wafer market. KDNS is pouring $11M into this line with dry etchers being given priority. Testech (Chunan, Korea) is investing $4M in the development of high-speed test and inspection systems, and Silicon Tech (Yongin, Korea), more than $4.3M.

Genitech (Daejon, Korea), a manufacturer specializing in atomic layer deposition (ALD) equipment, recently signed a joint development agreement with ASM. The Korean company will license its PEALD technology to ASM for three years, and will be an exclusive distributor of ASM's equipment in Korea. Meanwhile, SELIGHT (Suwon, Korea) is in cooperation with a Japanese company for its global sales, with Taiwan and Southeast Asia being its primary targets.

As the Korean government tries to raise the level of localization of key components of optical equipment, mobile handsets and equipment and systemized products by 2005, Korea's ASIC developers are greatly encouraged to contribute with SoCs (systems-on-a-chip) and telecom chips. Modem and ADSL chips are their targets for future market penetration, and some of the companies have formed a consortium to streamline development and marketing processes. Stream receiver ICs from TLI (Songnam, Korea) for digital broadcasting antennas are of special note because of their economical size and functions, and the company is poised to compete well with U.S. and European companies.

Some of the ASIC companies are beginning to launch sales in the United States. And, as the chips become regarded better abroad, they are appealing more to Korean companies, which are, in general, reluctant to buy local chips for their systems.

Two of these manufacturers began their businesses in the United States with headquarters based there. GCT Semiconductor (San Jose) is now ready to promote its global marketing and sales this year, with its Korean office (GCT Asia Pacific, Seoul) handling Korean and other Asian markets. This company will begin mass producing Bluetooth and PLL chips early this year.

Likewise, e-MDT (San Jose and Seoul) began business in Silicon Valley, but soon broadened development in Korea. The company's CEO was a Korean ASIC developer dispatched abroad in the 1980s. The specialist designer of submicron ASICs and ASSPs provides traditional front-end and back-end design services as well as full turnkey design solutions. The company is now focusing on licensing analog, USB, and communications IPs also.

Companies engaged in producing IC modules expect to increase business this year and beyond. Barun Electronics (Yongin, Korea) is investing to triple its assembly capacity of smart card IC modules, while Kiho Electronics (a subsidiary of Ise Electronics in Japan) is diversifying from contact-type to rf-type IC card modules.

ASIC companies continue to expand overseas markets. Decoder chip sales are brisk to China and Hong Kong, and image processors for security systems are emerging as a strong market force to Taiwan and Japan. With the embedded systems given a market focus these days, China is being targeted by some Korean companies. Advanced Digital Chips (ADC, Seoul), a forerunner of embedded microprocessor cores for its own unique architecture, is expanding its presence in China through strategic alliances with Korean developers there. ADC plans to open a U.S. office early this year.

Meanwhile, some ASIC companies are moving upmarket by providing value-added products such as modules and boards. WIZNet (Seoul), a fabless semiconductor company specializing in Internet interactive chips, has recently begun eyeing the market for Web camera modules. The company recently signed a joint development agreement with STMicroelectronics Asia Pacific for DVD and digital amplifiers.

Aralion (Seoul) supplies storage system chip sets to Taiwan under a joint development agreement. Korea's largest storage chip set provider is planning to expand production this year, increasing output as much as 5× over 2001.

The race to capture the voice recognition chip market has become intense among Korean companies. Lee In-Sok, CEO of Extell Technology (Seoul), hopes to secure 10% of this market, valued at $640M, in 2003.