[단독] Magnachip, if sold to China, threatens Korean OLED hegemony

MagnaChip Semiconductor, a native mid-sized system semiconductor company with a market capitalization of KRW 1 trillion, is being sold to Chinese capital, increasing the sense of crisis in the domestic semiconductor industry. MagnaChip Semiconductor is a leader in organic light-emitting diode (OLED) display semiconductors and develops and produces power semiconductors that will be applied to future automobiles.

Although the government’s approval process for the sale remains, if it passes through this gateway, it will pose a threat to Korea’s OLED display supremacy as well as the automotive semiconductor industry.

Currently, MagnaChip Semiconductor, a listed company on the New York Stock Exchange (NYSE), is achieving high earnings growth amid the semiconductor boom. It is in the past that after spin-off from Hynix Semiconductor (now SK Hynix) in 2004, the company was on the verge of bankruptcy. The sales amounted from $6790.7 million in 2017 to $792.2 million in 2019 (approximately 900 billion won). Last year, the foundry division, which had sales of 400 billion won, was sold to SK Hynix and a domestic private equity fund, but the non-memory system division alone generated approximately 570 million dollars in sales and the operating profit before amortization reached 49 million dollars (approximately 55 billion won). It was known to be. Currently, the largest shareholder is US-based Oak Tree Capital, which owns a 9% stake, and about 10 hedge funds share a 5% stake.

In particular, MagnaChip Semiconductor announced a plan to intensively foster display and power semiconductors after separating the foundry business last year. MagnaChip Semiconductor recently revealed, “It is becoming a new driver in the display semiconductor and power semiconductor markets, with sales growth of 260% and 111%, respectively, over the past four years.” Currently, in the display drive integrated circuit (DDI) production sector, it is ranked second in the world after Samsung Electronics. The company is currently supplying DDI for OLED to Samsung and LG Display. An official in the semiconductor industry said, “DDI for OLED requires high-level technology among DDI”. “If Chinese capital buys Magnachip semiconductor and absorbs OLED DDI technology, Chinese display companies can scarely beat up in the OLED market.” I was concerned. Currently, Samsung Display dominates more than 80% of small and medium-sized OLED panels for smartphones, and LG Display is 100% monopolizing the large OLED market for TVs.

MagnaChip Semiconductor is also developing automotive power semiconductors with the aim of mass production in the second half of this year. The company is already supplying a power metal oxide semiconductor (MOSFET) to Samsung Electronics that controls the power of smartphones and protects the battery. The goal is to advance into the automotive semiconductor business based on such power semiconductor technology.

Among these, the key remaining in the sale of MagnaChip Semiconductor in China is whether it can obtain government approval. Semiconductor is a national infrastructure and a national core technology, and the sale of the company is possible only with the approval of the Ministry of Trade, Industry and Energy. MagnaChip Semiconductor, which was previously spun off from Hynix, was approved by the government when it was sold to Avenue Capital, an American private equity fund in 2009. When China acquires MagnaChip Semiconductor, it will be an opportunity to enhance technology in the advanced DDI and power semiconductor business. An official familiar with the acquisition said, “Apart from the sale price of MagnaChip Semiconductor, which is over 500 billion won, the government’s approval was a key issue in the sale negotiations.”

However, there are observations that MagnaChip Semiconductor’s production technology is somewhat obsolete, and DDI and power semiconductors are not subject to the government’s technology protection, so approval may be surprisingly easy. After selling the Cheongju plant, which is a foundry division, MagnaChip Semiconductor maintains only the Gumi plant in Gyeongbuk. The Gumi plant’s process technology is 0.5 to 0.11 micrometers (㎛), and its production facility is based on 8-inch wafers and can process 113,000 wafers per month. Currently, the cutting-edge process in the semiconductor industry is 5 nanometers (nm·1000 nm is 1 μm) owned by Samsung Electronics and Taiwan TSMC. Compared to these, the microprocessing technology is different, and the facility is 8 inches, which is inferior to the 12-inch wafers used by major semiconductor companies. Ahn Ki-hyun, head of the Korea Semiconductor Industry Association, said, “The semiconductor products that the government strictly prevents leakage are memory semiconductors such as DRAM and NAND flash, and advanced system semiconductors such as mobile application processors (AP).” “You can fly easily,” he explained.

Meanwhile, with the sale of MagnaChip Semiconductor in China, LG Group, which was aiming for the middle ground in the semiconductor business, has been drinking a bitter cup again. LG, which is in desperate need of semiconductor technology to foster new businesses including future vehicle electronic equipment technology and artificial intelligence (AI), actively acquires not only the foundry division of Magna Chip Semiconductor (now Key Foundry), but also whenever semiconductors such as DB Hitech are released. I reviewed it, but every time I didn’t succeed. It is known that LG Corp.’s Business Strategy Office has been seriously considering the acquisition of MagnaChip Semiconductor. An official in the semiconductor industry said, “As Silicon Works, a system semiconductor subsidiary, was separated into the LX group this year and fell apart this year, LG has been immersed in mergers and acquisitions (M&A) to strengthen its own semiconductor technology.” I know that the anxiety was even greater when I took it,” he said.

[진영태 기자 / 이종혁 기자]
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