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Samsung urges Korea to expand beyond memory

Posted: 23 Oct 2009 ?? ?Print Version ?Bookmark and Share

Keywords:South Korea IC industry? NAND flash? power IC?

After listening to top business leaders in South Korea these days, one may come to a simple conclusion: The domestic semiconductor industry is in deep trouble.

Perhaps that's an exaggeration. A more accurate way of describing Korea's IC industry is that domestic chipmakers are reeling, as vendors have been battered by the current and unforgiving IC downturn.

Now, chipmakers are finally seeing an upturn, which should help heal their wounds from the recession. But going forward, Korea's four major chipmakers!and the nation's semiconductor industry as a whole!face its share of challenges.

At a recent event, a Samsung executive warned that his own company is still too dependent on the memory business, saying it must seek new markets to fuel future growth. Samsung itself has taken steps into many non-memory markets, including a move to re-enter the power IC sector, but the chip giant continues to struggle in many of those markets.

Another memory maker, Hynix Semiconductor Inc., has recently seen its creditors put the company up for sale!the lone bidder also appears to be shaky ground. In addition, MagnaChip Semiconductor Ltd has just emerged from bankruptcy. And analog foundry vendor Dongbu HiTek has been given a new capital injection to reduce its debt load.

If that's not enough, business leaders warn that Korea's ongoing push to jump-start its fabless IC industry has fallen short of its original targets. Korea's move to develop its fabless chip industry is critical, as the nation needs to propel new and innovative startups. The nation also remains too dependent on the lumbering, family-run conglomerates or chaebols, such as Hyundai, LG and Samsung.

Staying dependent
Clearly, South Korea is a powerhouse in memories, handsets, LCDs, TVs and related markets. The problem is that Korea is still too dependent on foreign sources for many of its non-memory chip products, warned Hak-Sun Kim, vice president of Samsung Electro-Mechanics Co. Ltd, the passives components and module unit of Samsung.

In the mobile market, for example, "most of the chips come from overseas," Kim said. "We are also importing 100 percent of our networking ICs."

"We are well-positioned in the memory business," said Youm Huh, vice chairman of the Korea Semiconductor Industry Association (KSIA). "In system LSI, Korea is weak."

Huh!who is also president and CEO of Silicon Mitus Inc., one of the emerging startups in the analog space in Korea!also urged the domestic fabless community to look beyond its own borders. Instead of seeking the international markets, local companies tend to look inward and sell their ICs to the two local giants in electronics!LG and Samsung.

"We are too dependent on the local market," he warned. "We have to expand our markets. We only have local players!not global players."

It's not all doom-and-gloom in Korea. The nation has carved out its place worldwide in automobiles, consumer electronics, semiconductors, steel and ship building.

But more importantly, business is looking up for the IC industry as a whole. "We're all seeing strong demand," said John Yong-In Park, president and chief executive of Dongbu HiTek (Seoul), an analog foundry vendor.

Still, there are major questions surrounding Korea's IC industry. The most obvious ones are clear: Can Hynix and MagnaChip survive over the long term? And what will Samsung do next?

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