Korea Diversifies its Semiconductor Industry

		At a Glance
	Korea's semiconductor activity is still largely dominated by memory devices and industry giants Samsung and Hyundai. But that is beginning to change as smaller IC manufacturers attack the ASIC market. Equipment manufacturers are growing with the industry, but also looking overseas for increased sales.

Korea's semiconductor industry has been facing the turmoil of changing winds. While the big names of the industry — Samsung Electronics and Hyundai Electronics — waver between smiles and cries as DRAM prices rise and fall, young and promising ASIC developers are being encouraged by success at home and abroad.

The two giants are adjusting their investment plans for 2001, trying to minimize their business risks while maximizing the profit potential from non-DRAM chips such as flash memory. At the same time, they are pushing ahead with their foundry businesses to compete with companies such as Amkor and newcomer Dongbu.

As IMT-2000 phones and digital televisions get closer to reaching the mass market, overseas semiconductor manufacturers are showing an active interest in Korea as a consumer. For France's STMicroelectronics, whose semiconductor sales are picking up in almost all sectors, Korean business rose more than 70% in 2000, more than twice Asia's total growth rate.

Fairchild Semiconductor, for its part, has added a fourth wafer fab in Puchon, Korea, fostering Korea as a primary production base for its Asia-Pacific business. Test and packaging businesses of Amkor Technology Korea are expected to rise this year, and other device manufacturers' plans to expand production capacity bode well for Korea's semiconductor equipment manufacturers.

ASIC boom

Korea's ASIC developers tend to focus on the quickly growing multimedia market, a move that is helping to diversify Korea's semiconductor industry. The small but promising companies seem to be accelerating the boom, diversifying their offerings with such devices as MP3 decoder chips, MP3 audio one-chip processors, USB 1.1 controller chips, image processors and set-top box chips. The companies are going upmarket by offering ASIC cores and design technologies as well.

Korea's World Trade Center towers over Seoul. (Source: COEX)

The ASIC developers are also beginning to attract foreign capital, and are globalizing their operations. TLSI, which specializes in LCD driver ICs, received funding from Taiwan's Holtech Semiconductors and venture capital company CID. Two more ASIC developers are negotiating for foreign capital, according to J.C. Jeong, chairman of the ASIC Developers Association.

The ASIC Support Center is also promoting Korea's non-memory IC business, helping start-ups by offering them development equipment and tools. More Korean companies, therefore, are expected to venture into ASIC development.

The future is looking good for Zaram Technology, a specialist IP developer. Following successful licensing agreements to Taiwanese and European players, the company hopes to earn more than $3M of royalties in 2002.

TLi poses a challenge to Texas Instruments by pitching digital audio decoders, and ED Tech has begun to tap the overseas market of multimedia image processors dominated by Pixelworks. In addition, Pulses Technology is quickly ramping up its mass production of digital-to-digital converter chips.

Another turning point will come for Korea in 2001 as it enters the microprocessor market. ADChips, which currently sells 32-bit embedded microprocessor cores to China and Taiwan, hopes to emerge as another Transmeta in the microprocessor market.

Exporting equipment

Amid mingled prospects for the semiconductor business in 2001, Korea's two silicon wafer manufacturers continue to have robust sales. MEMC Korea has secured orders for 2001, releasing an estimated $290M, a more than 10% increase over 2000. LG Siltron forecasts a 13% sales increase this year. Both companies operate their production lines at full capacity. As DRAMs shift from 64 Mb to 128 and 256 Mb versions, they are improving their fine-line processing technologies.

The 2001 forecast for the investment by local semiconductor manufacturers is $7.4B, up 24% from 2000, according to Daewoo Securities. However, a business slowdown in Korea is likely to shrink investment volume to just a 2% increase, which will force local semiconductor equipment manufacturers to boost exports.

As many as five companies are listed on the Korea Stock Exchange, and 15 companies were enrolled in the KOSDAQ last year. Ten more companies are expected to be attracted to the KOSDAQ this year, according to industrial specialists. Spin-offs from Samsung and Hyundai — as well as those with capital connections to the two companies — are doing particularly well at home and abroad.

Samsung recently set up its Line 10, helping local equipment manufacturers enjoy brisk development. They began to develop 300 mm wafer equipment and show a competency for DRAM-based equipment. "Now is the time for the equipment manufacturers to promote joint-development projects with Samsung and Hyundai, and they are doing a good job at this," said Down Suh, senior analyst at LG Securities.

However, Korean companies still have a long way to go, according to Suh, in terms of marketing capability. "Since chip manufacturers don't easily change their sources, Korea's equipment manufacturers should have endurance for the time," he said. "But they still need to show how they could manage troubles and crises that might occur in their operations."

Despite recent progress, Korea's semiconductor equipment industry is still considered to be in its infancy. Heavy dependence on Samsung and Hyundai is lessening, and markets are becoming more diverse. Taiwan is a primary target for overseas sales.

Many companies see Taiwan as their main overseas market because of the large number of foundry lines, and those with stable capital have begun to invest in Taiwan through joint ventures. Acqutech is one example of this. With two joint ventures in Taiwan and Malaysia, the "eco-friendly plating technology" company has even penetrated Japan's market, becoming the first foreign company to successfully offer Japan its material/plating outsourcing services.

EO Technics, which makes laser markers, ships more than 80% of its output overseas. Korea's CVD equipment specialist Jusung Engineering has started a joint-development project with Japan's ULVAC, and hopes to enter the European market with force this year. PKL expects to increase shipments of its photomasks to LSI Logic this year. Korea DNS is striving to expand its exports to Japan, having recently passed reliability and QA tests at DNS of Japan for its wet stations. The company also shipped five systems to Taiwan recently.

Foundry expansions

Meanwhile, Korean companies are making their way to 300 mm wafer fab lines. Hyundai is likely to transfer its Wales factory to 300 mm wafer production as early as late next year. The company recently received foundry orders from Taiwan and the United States for non-memory ICs. In line with this, it transferred five 0.35 µm DRAM lines to a logic IC foundry, and one will be transferred to 0.25 µm soon. The company invested more than $400M in its foundry business in 2000, a figure that is expected to reach $600M in 2001, according to a company spokesperson.

Hyundai's monthly foundry capacity is expected to rise to 140,000 wafers in the second half of this year, to reach $750M in sales. Management has set a goal to jump to the world's third largest foundry operator with a yearly sales volume of $1.2B in 2002.

Anam Semiconductor plans to construct copper-based process lines for 0.15 µm technology this year. With operation scheduled to begin next year, the new factory will focus on 300 mm wafers. Capacity will increase 50% to 45,000 wafers next year.

With major companies pouring a great deal of money into capacity expansion, Korea's foundry business is expected to thrive. For the 200 mm wafers, the country's production capacity will increase more than 60% this year to 185,000 wafers per month. Industry observers expect Korea to surpass Singapore this year in terms of capacity. •

SEMICON Korea 2001: Jan. 31-Feb. 2

In light of a strong recovery in both its semiconductor business and overall economy, Korea will spotlight a record number of products and exhibits at SEMICON Korea 2001 scheduled for Jan. 31-Feb. 2 in Seoul. The market for semiconductor capital equipment has experienced triple-digit growth this year, and double-digit growth is expected for 2001. The Korean market is estimated to increase 101% to just less than $4B for 2000, according to the Annual SEMI Consensus Forecast 2000-2003, released last month. For 2001, the market should reach slightly less than $5B, about a 20% increase over the current-year forecast. This year's SEMICON Korea, being held at the Convention and Exhibition Center (COEX), will feature the largest number of products and exhibits in the show's history. The main event will take place Jan. 31-Feb. 1. Hours will be 9 a.m.-6 p.m. the first day and 8:50 a.m.-5:20 p.m. the second day. Conference sessions will cover topics including device technology, advanced lithography, dielectric and interconnection, etching, product and process reliability, manufacturing and yield enhancement, packaging, test and 300 mm technology. In addition, a market briefing seminar will be held from 10 a.m.-noon Feb. 1 and a packaging tutorial program will be held from 9 a.m.-4 p.m. Feb. 2. For more information on SEMICON Korea, visit www.semi.org. •