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SK Hynix completes 20 trillion won NAND plant

Moon praises company for tech investment and many new jobs
Oct 05,2018
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President Moon Jae-in talks with employees at the M15 NAND flash plant in Cheongju, North Chungcheong, on Thursday. [YONHAP]
CHEONGJU, North Chungcheong - SK Hynix, Korea’s second-largest chipmaker, plans to invest 20 trillion won ($17 billion) in M15, its new manufacturing plant for NAND flash chips in Cheongju, North Chungcheong. The two-story factory, which was completed on Thursday, measures 60,000 square meters (14.8 acres) and is the largest of SK’s six chip plants.

M15 will concentrate on manufacturing NAND flash, a non-volatile storage chip that does not require power to retain data.

“We’ve come a long way from a company once considered acquisition bait for foreign capital to become a leader in the global chip market - all thanks to support from the country and the regional community,” said SK Group Chairman Chey Tae-won in a speech celebrating the plant’s completion Thursday.

“[SK Hynix] will keep up with technology development to world-class levels and strengthen Korea’s capacity in semiconductors, which sit at the core of the fourth industrial revolution.”

The ceremony was attended by President Moon Jae-in and other top government officials including Finance Minister Kim Dong-yeon and Trade and Industry Minister Sung Yun-mo.

“Semiconductors are the engine of Korea’s economy that generated a record $61.2 billion in exports in the year’s first half,” Moon said in a speech. “But U.S. and Chinese competitors are following at a fierce pace. Making investments in advance for revolutionary technology is of utmost importance.”

The president particularly praised the company’s efforts in creating jobs.

“The Cheongju plant will be hiring 1,000 [new employees] by the end of this year and 2,100 employees by 2020,” Moon said. “New hiring from [SK Hynix’s] business partners is expected to reach 3,000, which is a good opportunity for the Cheongju youth.

“[The plant] will not only vitalize the regional economy [including boosting surrounding commercial businesses and restaurants] but also contribute to the nation’s balanced development.”

Moon thanked the company for its impressive growth and large investments, adding that the government will offer “support so that companies can make investments at the right time.”

SK Hynix spent 2 trillion won on the construction, and the company is expected to make additional investments, including the installing of computer chip manufacturing machinery.

A Seoul National University team estimated that by 2023, the M15 plant will likely result in the creation of 210,000 job opportunities including at SK Hynix suppliers and business partners as well as surrounding businesses. It estimated production value would amount to 70.9 trillion won.

SK Hynix, which struggled for nearly a decade after Hyundai Group gave up its management rights in the early 2000s in the aftermath of the Asian financial crisis, has become a leading cash cow for SK Group. Despite internal opposition to the acquisition, Chey strongly supported SK’s takeover of the indebted chipmaker for more than 3 trillion won in 2011.

The 20 trillion won investment in M15 is seen as a bold move considering that the chipmaker’s annual operating profit last year was at 13.7 trillion won. The investment is expected to set a record for a single manufacturing plant for the company.

The new plant is an attempt for SK Hynix to strengthen its NAND flash business. SK Hynix’s business portfolio has a heavy dependence on DRAM memory chips, with the ratio of DRAM to NAND Flash revenue reaching around eight to two.

Its relative weakness in NAND also shows in the global rankings: According to IHS Markit, SK Hynix placed second in the DRAM business, with 28.1 percent market share behind Samsung Electronics’ 45 percent.

But in NAND flash chips, it ranked fifth with 11 percent market share behind Samsung, Toshiba, Western Digital and Micron.

M15 is anticipated to pull up NAND flash production. Its main product will be the 72-layer 3-D NAND, the company’s most advanced chip so far, and a 96-layer 3-D NAND that is currently under development. Mass production for the 96-layer chip is planned for the first half of 2019.

The chipmaker did not disclose M15’s manufacturing capacity on grounds of confidentiality, but industry sources estimate the plant will produce up to 200,000 wafers per month which will double the company’s NAND flash production.

The plant is set to start mass production in early 2019 after machinery and instruments for chip production are installed. Thursday’s event celebrated the completion of the buildings and cleanrooms that prevent fine particles entering the manufacturing areas for semiconductors.

M15’s completion comes at a time when analysts have mixed outlooks on the chip market and the falling market prices for NAND flash chips. Goldman Sachs and Morgan Stanley downgraded their views of the semiconductor sector in the last two months, citing concerns about oversupply. But some analysts argue that price drops will not be that drastic and can be overcome by an increase in demand.

On NAND flash, manufacturers maintain positive outlooks on its demand in lighter solid-state drives (SSD), for which NAND is a core component. They are replacing traditional hard disk drives in computers and servers. Smartphone makers are also increasing storage in new models which calls for NAND flash chips of higher density.

“Apart from the demand factor, new-generation NAND flash chips are getting more and more difficult to produce in terms of the level of technology and required equipment,” said an industry source.

“From the manufacturer’s point of view, investment is a necessary cost and preparation to meet rising demand [in the future].”

Local manufacturers Samsung and SK are ramping up investments. Combined, they have five chip plants being constructed worldwide, all equipped with high-tech facilities to maintain their lead in global competition, especially ahead of Chinese companies.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]